Friday, April 3, 2009

Survey of Shortfall

By Michael Knudsen

* Author's note: This piece was originally written in January of 2009. Some of the contents is out of date as a result. For example, California's budget has now passed (although it still has a shortfall.) The $40 billion deficit figure was from prior to its passing.


Our states' budgets are in trouble.

Big trouble.

According to CNN Money, no less than 43 of these United States are facing budget shortfalls. (1)

And we're not talking chump change here on dollar amounts.

“At the end of the last fiscal year, 29 states had shortfalls topping $48 billion.” (1)

That's a big number, but apparently, we ain't seen nothin' yet.

“The report suggests that because the current recession is worse than the previous recession, the Center on Budget and Policy Priorities projected that nearly all states will face shortfalls, and the deficits should end up totaling over $100 billion [emphasis mine] in fiscal year 2010.” (1)

The billions and trillions that the Federal Government has been throwing around in economic stimuli packages have made us a bit numb to these big numbers. Our minds are incapable of processing them.

Here's my favorite means of putting this into perspective: A trillion seconds is 33,000 years.

So, if the Center's report is to be believed, the aggregate state budget deficit will be the number of seconds in 3,300 years by 2010.

Yikes.

In Ohio, their budget scenario is described as “the outline for a near-meltdown of state government services.” It amounts to “six prisons and several other corrections facilities shut down, the state parks system closed, a likely $2,000 tuition hike at state universities, all state agencies cut by 25 percent, and much more.” Governor Ted Strickland projects a cumulative $7.3 billion budget deficit by the end of 2011. (This number assumes that Ohio continues spending at its current level, receives no federal aid, and that the U.S. economy suffers a “severe manufacturing and financial contraction.” Absent these three factors, the Cincinnati Enquirer points out that the number should be closer to $4 billion.

I'm sure Ohioans feel much better now.) (2)

In Wisconsin, Governor Doyle in October described the budget hurdles as “very severe” for his state, a possible $3 billion shortfall in the next two-year budget. (3)

In Arizona, the red ink began even before Wall Street tanked in September. As of January last year, this amounted to $900 million in deficit funds for the 2008 fiscal year. (4)

Then, there's....California.

Oh, is there ever.

My fair state has a two year gap in revenue to the tune of $41.6 billion (that's billion with a “b”), according to Governor Schwarzenegger. (5)

Our budget deficit is bigger than the entire government doles of most other states combined.

It's gotten so bad here that the state will have to issue “I owe you”s on tax refunds, welfare checks, and student grants. (Hey, this would be fun. How 'bout taxpayers try doing the same to the collector?)
(6)

Naturally, when the government takes in less money than it wants to spend, the debate about where to make cuts, and whether or not to raise taxes, begins.

So what's the incoming California legislature's big idea for getting us out of this mess?

“[Assemblyman John A. Perez (D-Los Angeles)] said his priorities include an end to the two-thirds vote requirement for passing budgets and raising taxes, and changing the way that taxes are divided between the state and local governments to provide more stability to municipalities.” (7)

Translation: The Republican minority always just gets in the way. Let's make sure they don't get any say at all in blocking tax increases.

(And to be fair, CA voters recalled Gray Davis, a Democrat, and installed Schwarzenegger, a Republican, and here we are.

Smile. You're on Disillusioned Voter Camera.)

Three things are now commonplace in California: bad budgets, higher taxes, and native Californians leaving.

Regarding bad budgets, the San Diego Union Tribune's Chris Reed summed it up. “This is what it's come to for journos who cover Sacramento: surveying all the horrible budgets of the past and trying to figure out which was the worst of all.” (8)

Regarding higher taxes, consider that we've the six highest tax burden per capita among states. (9)

And regarding people leaving, 144,000 people found the exit last year, more than any other state. (And this was the fourth year in a row.) (10) Can't really blame them. Third highest unemployment in the nation, to top it all off. (9)

I don't think this was the “California Dreamin'” that The Mamas & The Papas had in mind.

In South Carolina, where its budget had to be pared by over $621 million, the exemption on grocery sales taxes took the blame for the shortfall from state economists.

“'There's a lot of states that don't tax groceries,' said Rep. James Smith, D-Richland. 'I don't think we can blame it entirely on the sales tax.'” (11)

(Defending tax cuts...from a Democrat? Don't hear that too often, at least not in California. But then again, South Carolina's 2009-10 budget is actually balanced, which NEVER happens here either.) (12)

In Wisconsin?

“But [Gov. Jim Doyle] made it clear he would seek other more targeted tax increases, including a tax on hospitals defeated by Republicans last year...”

Over to you, Republican Assembly Speaker Mike Huebsch.

“'We need to make sure that families' budgets are strong and that they are sound,' Huebsch said in an interview. 'If we have a budget shortfall, it's not because we're taxing too little, it's because we're spending too much.'” (3)

(His second sentence is from the classic Reagan play book. But I do have to wonder what the citizens' budgets have to do with balancing the state budget. Nice sound byte, but the government has only the power to fix the latter. )

In Arizona, the two parties, as is typical, disagreed on a budget solution. Once again, the clever sound bytes came in.

“Democratic Gov. Janet Napolitano and two key Republicans in the Legislature are far apart in their proposals to balance the budget. They don't even agree on the amount to cut. The governor proposes $870 million and the Republican chairmen of the House and Senate appropriations committees put the number at $970 million.”

What say you, Governor's aide?

“'You don't have to take a meat ax to the budget to balance it,' said George Cunningham, Napolitano's budget chief.”(4)

Apparently, going from $870 to $970 million turns the cuts into a “meat ax.” (I guess the Democrat proposal was just a hair trimmer.)

Smelling funding cuts in the air, the University of Arizona had something to say.

“'If we continue to lose top faculty, the return on investment the state expects of us will not be realized,' [University of Arizona President Robert] Shelton said.” (4)

(Insert cheap shot about those poor old lifetime tenured professors who surely will go hungry with reductions of their six figure salaries here.)

Much harder to roll one's eyes at, or justify politically, are cuts in programs aimed at “the needy,” “the children,” or any combination thereof.

“'We want to make sure that [Arizona] doesn't balance its budget on the backs of children,' said Dana Wolfe Naimark, executive director of the Children's Action Alliance.” (4)

Back to Ohio: “[Gov. Strickland] also is making a persuasive case for specific, targeted aid- for Medicaid, unemployment assistance, Temporary Assistance for Needy Families (TANF) and other programs. That would help greatly, and we can be sure President-elect Barack Obama is listening to Strickland.” (2)

Back to Wisconsin: That $3 billion shortfall could lead to “job cuts, delays of approved expansions in health programs for the needy [emphasis mine] and scaling back new state money for public schools and universities. (3)

Even here in California, where the state already can't pay its bills, voters just approved Prop 3, a $980 million bond issue for Children's Hospital. (13, 14)

(We also approved Prop 1A, a “just shy of $10 billion” obligation for a high speed rail between Los Angeles and San Francisco.

I am reminded of the classic episode of The Simpsons where Springfield gets conned, “Music Man” style, into giving money for a non-existent monorail.) (15, 16)

Beyond the taxation and spending debates, the more fundamental issue here is this age-old battle between liberals and conservatives.

The former argue that the government can and should take care of the people, and can always tax more if need be to do so.

Mean ole' conservative curmudgeons like me argue that these programs, while well intentioned, usually can't be funded, are awash in wasteful spending, and often don't work as well as the private sector. (I would add also that we get so used to good economies, that we forget to plan for the inevitable bad ones.)

It's far easier to note what's wrong in government than to fix it. Far easier to play armchair governor, than to actually run things.

But that said, consider the following:

We have been here before.

“Squeezed by the worst budget crunch in almost a decade, states are scrambling to cut spending, avoid raising taxes and spare education.” (17)

Guess when that was written.

2008?

Nope. 2001.

Here's more from that same article: “According to a survey being released today, 35 states face a total budget shortfall or more than $25 billion for this fiscal year- the worst since 1992.” (17)

Sound familiar?

Economies go up, and economies go down. The same is true of government revenues.

It seems of late, however, that the solution is the same whenever both are on the wane.

“The [Center on Budget and Policy Priorities] report... suggest[s] that the federal government provide states with stimulus money soon, instead of waiting for states to get further in trouble, and that the aid should be larger than the amount of money given to states in 2003, following the previous recession.” [Emphasis mine.] (1)

Why worry about balancing the budget and making a state government work when Uncle Sam can bail you out?

As one Maryland State Senator put it recently: “It doesn't matter if Maryland's broke, as long as Obama's President.” (18)

Why worry, indeed.

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ARTICLES AND WEBPAGES CITED

1. Catherine Clifford, 43 states in financial trouble, http://money.cnn.com/2008/12/10/news/economy/state_budgets/index.htm?postversion=2008121016, (last updated Dec. 10, 2008).

2. Cinncinati.com, Strickland's bleak picture of Ohio, http://news.cincinnati.com/article/20081214/EDIT01/812140365/1019/EDIT, (last updated Dec. 14, 2008).

3. Jason Stein, Doyle Predicts $3 billion shortfall, http://www.madison.com/wsj/home/local/30967, (Oct. 16, 2008).

4. Blake Murlock, State budget crunch: UA, social agencies, schools brace for worst, http://www.tucsoncitizen.com/daily/local/73346.php,
(Jan. 6, 2008).

5. Gov. Arnold Schwarzenegger, Budget Summary: Governor's Message, http://www.ebudget.ca.gov/pdf/BudgetSummary/GovernorsMessage.pdf, (Jan. 9, 2009).


6. Allahpundit, HotAir.com, California goes bust: Tax refunds to be delayed, http://hotair.com/archives/2009/01/16/california-goes-bust-tax-refunds-to-be-delayed/, (Jan. 16th, 2009).

7. Patrick McGreevy, Welcome to Sacramento, and good luck, http://www.latimes.com/news/local/politics/cal/la-me-legis1-2008dec01,0,5967301.story, (Dec. 1, 2008).

8. Chris Reed, U-T Opinion Online: America's Finest Blog, Tiny consolation: It's not the worst state budget ever, http://weblog.signonsandiego.com/weblogs/afb/archives/027502.html, (Sept. 16, 2008).

9. Ed Morissey, HotAir.com, California Joblessness Now Third in the Nation, http://hotair.com/archives/2008/11/22/california-joblessness-now-third-in-nation/, (Nov. 22, 2008).

10. Michael R. Blood, Go East, young man? Californians look for the exit, http://news.yahoo.com/s/ap/20090112/ap_on_re_us/fleeing_california_3, (Jan. 12, 2009).

11. John O'Connor, S.C. tax cuts get blame for budget woes, http://www.thestate.com/local/story/609108.html, (Dec. 3, 2008).

12. South Carolina Office of the Governor, Gov. Sanford Unveils 2009-10 Executive Budget, http://www.scgovernor.com/news/releases/01-09-09.htm, (Jan. 9, 2009).

13. Office of CA Secretary of State Debra Bowen, Tuesday, Nov. 8, 2008- Election Night Results- Proposition 3- Children's Hospital Bond Act. Grant Program, http://vote.sos.ca.gov/Returns/props/map190000000003.htm (last Updated Nov. 26, 2008).

14. Office of CA Secretary of State Debra Bowen, Voter Information Guide- Prop 3 Children's Hospital Bond Act. Grant Program Initiative Statute, http://www.voterguide.sos.ca.gov/title-sum/prop3-title-sum.htm (accessed Jan. 19, 2009).

15. Office of CA Secretary of State Debra Bowen, Tuesday, Nov. 8, 2008- Election Night Results- Proposition 1A- Safe, Reliable High-Speed Train Bond Act, http://vote.sos.ca.gov/Returns/props/map19000000001A.htm, (last updated Nov. 26, 2008).

16. Office of CA Secretary of State Debra Bowen, Voter Information Guide- Prop 1 High Speed Rail Bonds Legislative Initiative Amendment, http://www.voterguide.sos.ca.gov/title-sum/prop1-title-sum.htm, (accessed Jan. 19, 2009).

17. Haya El Nasser, Red ink overtakes state budgets, http://www.usatoday.com/news/nation/2001/12/10/statebudgets-usat.htm, (last updated Dec. 9, 2001).

18. Allahpundit, Hotair.com, State senator: It doesn't matter if Maryland is broke as long as Obama's President, http://hotair.com/archives/2009/01/17/state-senator-it-doesnt-matter-if-marylands-broke-as-long-as-obamas-president/, (Jan. 17, 2009).

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