The truth pays off in budget issues
As Congress grapples with passing various appropriation bills before the end of the federal fiscal year in September, in most states of our Union, the fiscal year ends at the end of this month. There is reason to fret: In half of those states, a budget has yet to be passed.
Almost 60 percent of the states are operating in the black, according to the nonpartisan State Budget Solutions. But 21 states are deeply in the red, some with ballooning deficits in the billions. While red and blue states struggle to find new sources of revenue, some states seek to balance their budgets once more with cuts that target the neediest Americans.
Citizens’ educations are at risk in those states. Louisiana and Wisconsin have dealt a massive blow to higher education. Republican Gov. Scott Walker of Wisconsin advocates deep cuts from universities to grade schools, all but abandoning state workers’ health benefits. The state is $2.2 billion in the red. The decisions these red-ink states make will impact the nation for years to come.
Three of the red-ink states have Republican governors who are already running for president or are close to declaring — Bobby Jindal of Louisiana, Walker of Wisconsin, and Chris Christie of New Jersey — yet none can claim they brought their states out of the recession, even with Republican legislatures in Louisiana and Wisconsin.
Don’t think budget battles in the red-ink states are solely between the Democrats and Republicans. The most intense fighting is going down between conservative and moderate Republicans over more austerity cuts or restoring taxes that were lowered in failed efforts to stimulate their economies.
In Louisiana, lawmakers must deal with a $1 billion plus shortfall. Here, 11 Republican lawmakers actually wrote to Grover Norquist, the private citizen with a nonprofit “tax-reform agency” that urges lawmakers and political candidates alike to sign pledges to never raise taxes.
Louisiana Republicans pleaded with Norquist to loosen the “no tax” pledge that Gov. Jindal had agreed to, and allow the state some wiggle room to deal with the deficit. He wasn’t bending. Nor will Gov. Jindal give an inch. It’s a mess created by Jindal’s focus on his presidential ambitions, not on the future needs of my beloved home state.
Similarly, Gov. Christie has also failed to pull New Jersey out of the red. This year, Christie handed the Democratic legislature a budget shortfall nearly one-third of a billion dollars greater than projected. However, Christie reaped a windfall when the New Jersey Supreme Court ruled this week that he didn’t have to honor a pledge he made to make annual payments to state workers’ retirement funds in return for worker’s increased contributions (which they made).
This brings us to the undiscussed, even undisclosed, expenses of many state budgets. I say “undisclosed” because state budgets only reflect cash being spent while past commitments silently accumulate into mountains of debt, and bills owed are kicked down the road from one crisis to the next.
Paul Volcker, former head of the Federal Reserve, managed the U.S. economy under both the Jimmy Carter and Ronald Reagan administrations. Volcker later formed a nonpartisan, nonprofit organization to restore fiscal trust at all levels of government.
The Volcker Alliance recently concluded that the public cannot make informed budget decisions about either priorities or fairness until invisible costs are dealt with up front. “These (smoke and mirror) practices make budget trade-offs indecipherable,” to citizens, Volcker said.
Continually sweeping costs under the rug means “bridges and roads are being left to crumble, public schools and state universities are being starved, ‘rainy day’ funds are being drained, and public workers are counting on pension plans that may melt down at some point,” reported the New York Times on Volcker’s findings.
The Volcker Alliance cites California as a promising story, largely because Gov. Jerry Brown insisted hidden costs be addressed. Prior to Brown, California was in the position of today’s 21 red-ink states, lunging from crisis to crisis, using legal accounting tricks to mask fiscal problems.
Brown’s straight-on attack lowered California’s debt by $10 billion, from $34.7 billion to $24.9 billion. He did it partially by persuading voters to approve a state income tax hike to 13 percent. Some costs, like $200 billion in unfunded pension and health care pledges, remain to be dealt with. It’s “too early to tell if the state’s fiscal culture has changed permanently,” says Volcker.
That said, California is in the black because of a governor who presented the whole truth to the voters. Meanwhile 21 other states struggle to avoid drowning in red ink.
Congress, if you’re watching, pay attention to how governors are handling their budgetary shortfalls and future investments, and who’s being honest with their citizens.
Donna Brazile is a senior Democratic strategist, a political commentator and contributor to CNN and ABC News, and a contributing columnist to Ms. Magazine and O, the Oprah Magazine.