Out of Control Policy Blog

When It Rains, It Pours--Part 2

Following up on this recent post, the news on the state budget front continues to look bleak. Here's a sampling of some recent news:

  • Pennsylvania: Well, it was only 101 days overdue, but Pennsylvania finally has a budget for the current fiscal year. However, the $27.8 billion budget passed by the Senate and signed by the Governor Friday night leaves our friends at the Commonwealth Foundation asking, "is this the budget we waited for?" The answer is no, and they find that the recently-passed budget "taxes too much, spends too much, and puts Pennsylvania on an unsustainable path to the future."
  • Washington State: Despite closing a roughly $4 billion budget deficit just a few months ago, the state's ongoing fiscal woes deepened last week when a court ruling on the state's business-occupations tax exemption helped drive the current year budget deficit to somewhere between $1-1.2 billion. And as Jason Mercier at the Washington Policy Center writes here, State Treasurer James McIntire is worried about the potential of a proposed spending limitation initiative to harm state's strong credit ratings. As Jason writes, ratings agencies are probably much less interested in proposed spending limitations and are far more concerned with state policymakers finding ways to restore structural integrity to the budget when the stimulus gravy trains runs out.
  • Maryland: Facing a $2 billion shortfall for fiscal year 2011, Governor Martin O'Malley wants to avoid tapping "rainy day" reserve funds to help close the shortfall, but some of his colleagues in the legislature are asking "if you never use it, why do you have it?" They must have forgotten that rainy days funds are in large part designed to mitigate risk, and if the legislature wants to burn those funds now, then they'll expose taxpayers to much higher risk down the road. And the rainy day fund is best thought of as for use on a rainy day to deal with above average (but not extreme) revenue fluctuations, not to deploy in the midst of a fiscal hurricane that is set to last for years.
  • Indiana: While the state has generally weathered the fiscal storm engulfing so many other jurisdictions—it passed a balanced two-year budget in June with $1 billion in surplus—Indiana is now seeing sharp declines in tax revenue collections that threaten to throw that budget significantly out of balance. According to the Indianapolis Star, Gov. Mitch Daniels issued a warning last week that the state has seen revenues from the last three months come in $254 million less than expected, increasing the likelihood of budget cuts in coming months.
  • Massachusetts: According to the Boston Globe, policymakers are bracing for new revenue estimates expected to show that the state is already up to $1 billion in deficit for the current fiscal year, only three months in. The article notes that, "[the] projected deficits in the $27 billion budget three months into the fiscal year follow hefty tax increases in the past two years, heavy use of reserve and federal funds, and a round of spending cuts that state leaders described as devastating to government services."
  • Florida: After having already hiked taxes and fees in Florida by the tune of $2.2 billion this past year, Florida policymakers heard the unwelcome news last week that the state budget is facing a $2.6 billion deficit for next year.

Leonard Gilroy is Director of Government Reform


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Comments to "When It Rains, It Pours--Part 2":

Allen | October 13, 2009, 1:40am | #

Apparently McIntire isn't familiar with Louisiana



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