Out of Control Policy Blog

When it Rains, It Pours

This has been a bad week for state budgets. Here's a sampling from across the nation:

  • New York: Revenues are down 35 percent in New York, and the state is roughly $3 to 3.5 billion in the red this fiscal year (so far). Meaghan McDermott at the Democrat and Chronicle reports on a recent speech to a business group in which Gov. David Paterson warned of "'cataclysmic' consequences if lawmakers don't rein in the state's ballooning budget deficits." He specifically called for a state spending cap, pension reform and an end to unfunded mandates. Sounds like a reasonable start to me.
  • Pennsylvania: Tom Barnes at the Pittsburgh Post-Gazette reports today that there's still no resolution to the budget impasse in the Commonwealth, with House Democrats rejecting two tax increases packaged in a $27.9 billion, bipartisan Senate budget proposal. The state is now beginning month four of fiscal year 2010, a year for which it still hasn't passed a budget.
  • Connecticut: Ted Mann at The Day reports that state comptroller Nancy Wyman is warning that the newly-minted budget may already be up to $500 million in the red. Even with new tax increases, current revenue trends have turned south and are likely to come in short of budget projections. Here's my favorite part of the article: "Wyman's letter to Rell also zeroes in on another potential flaw in the $37.6 billion, two-year budget, which Democrats passed over Republican objections, but which the governor allowed to become law without her signature. The budget assumes $473.3 million in 'largely unspecified savings' to be racked up over the next two years, Wyman notes, but doesn't say exactly how various state agencies and programs will save that money." If something is unspecified, it's unmeasurable, and if it's unmeasurable, it's highly likely that will ever materialize, absent external pressure.
  • Arizona: ABC15 in Phoenix reports that the latest state budget analyst analysis finds that the FY 2010 budget gap has grown to $1.5 billion. This is another case, like Connecticut, where the very same day the Governor signed the budget package, it was already hundreds of millions in the red. What's worse is that as the political dysfunction at the Capitol continues, the state's looking at a $2 billion deficit in FY 2011, and a $3 billion deficit in each of FY 2012 and FY 2013. Ouch (spoken as a frustrated Arizona taxpayer).
  • Mississippi: Over at the Clarion Ledger, Natalie Sherman reports that Gov. Haley Barbour is warning that the state will faces deeper spending cuts, given that September's revenues came in 10 percent ($44.9 million) under projections.
  • Hawaii: The Honolulu Advertiser reports that, due to an accounting glitch, it turns out that there was actually $36.8 million less revenue collected in fiscal year 2009 (which recently ended, of course) than previously calculated.
  • Medicaid: Kevin Sack at The New York Times reports on a new Kaiser Family Foundation commission survey that finds a tremedous ramp-up in Medicaid enrollment, threatening to blow state budget deficits wide open in the next few years. The article notes that, "Governors also have expressed concern about the fiscal impact of the health care legislation being negotiated in Washington, which would vastly expand eligibility for Medicaid as one means of covering the country’s 46 million uninsured." If I was a governor, I'd be very worried about this too. We do live in a world of finite resources, after all.

Leonard Gilroy is Director of Government Reform


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Comments to "When it Rains, It Pours":

Adrian Moore | October 4, 2009, 11:34pm | #

I can't help but look at this in the context of recovering from the recession. I fear that if even 25-30% of states refuse to face the music and cut spending, but instead do dumb stuff like raise taxes or float more debt, that will dramatically push back the recovery in those states, and consequently the whole country.

This is a chance for states to build policies that provide budget stability while stimulating economic growth in the market. But all too often I see legislators wooed by quick fixes for which future payments are high. When those "bills" come due, it will knock a lot off of the next economic peak and make for a longer term stunting of economic growth.



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