The impending State budget deficit

It’s a state budget shortfall which some believe could run as high as one billion dollars. Despite this large number, next year’s budget downtown could prove beneficial to the taxpayers provided that policymakers learn from the lessons of the past.

First, the budget shortfall will create a political environment in which reform can occur. Big reforms don’t occur in the good years when the Legislature has plenty of new money to spend. They happen in the down times when it’s hard for politicians to vote against money saving proposals.

Last week I joined with other legislators in a hearing which examined the impact of past reforms. According to testimony provided to our committee, one of these reforms, the unification of the state’s technology resources is now saving the taxpayers 80 million dollars each year. This reform only passed the Legislature during the last downturn when legislators were hard pressed to act against a money-saving proposal.

This year I am optimistic that new agency consolidations will win approval.

Perhaps the Legislature will also continue last year’s effort to close the inappropriate and dangerous tax credit giveaways which have been corrupting the state tax code. These programs give away big benefits to those who hire lobbyists, lawyers and accountants to win a special giveaway to the detriment of the average taxpayer who doesn’t have the same clout.

Secondly, most of next year’s budget deficit will be of the Legislature’s own making: a mistake which must not be repeated. For the past two years the Legislature has refused to recognized reality. Instead of meeting the downturn through spending reduction, it has attempted to maintain much of the ongoing spending by raiding one-time funding sources. As an example, last year the Legislature took 50 million from a fund for paving county roads. While this helped plug the budget hole for one year, that 50 million of spending remained in the budget. Now, the Legislature must once again find that 50 million dollars. They can either raid the road fund again, or do the right thing and reduce spending.

I can only hope most legislators have realized the futility of kicking the fiscal can down the road and will design a budget which recognizes reality. They will no doubt be tempted to fill the budget shortfall by again raiding the road funds, taking other one-time money, or substantially levying from the state’s rainy day fund. This will mostly serve to pass the problem on to the next year. Instead, I would suggest that most of the deficit should be realized through a reduction in spending.

Third, the issuance of new debt takes a heavy toll on the next year’s budget. It’s one of the most underreported aspects of last year’s budget: though the Legislature did reduce the budget of nearly 49 state agencies, the collective savings more than 40 of those reductions does not offset the new spending required to make debt payments on the new debt issued by the Legislature the year before. Thus spending didn’t so much decrease inasmuch as it was moved around.

Inexplicably, as the Legislature was coming to grips with this punitive new debt payment, and dealing with a massive shortfall, it again issued not one but two new bonds. I don’t know how to explain this shocking lack of fiscal restraint and I am not at all optimistic that the Legislature will learn its lesson. As strange as it may seem, and even with a possible shortfall of a billion dollars, it won’t surprise me to see the Legislature again issue more debt.

Finally, the massive expansion of the welfare state must come to an end. Even in the past two down years, the Legislature has continued to fund the expansion of benefits. This isn’t at all sustainable and will likely end during this year.

During the next year, I intend to act according to these lessons and provide a voice on behalf of fiscal discipline.

Thank you for reading this article. Your interest and input are much appreciated. Please do not hesitate to email [email protected] with your thoughts and suggestions.