Tuesday, February 26, 2008

Goldwater Institute: Pretending there isn't a budget problem won't make it go away

Denial and Delay

By Byron Schlomach, Ph.D.

Several states are facing some tough fiscal times. California's overspending problem amounts to more than $14 billion for the 2009 fiscal year. New Jersey's spending versus revenue gap could be $3.5 billion. Virginia and Massachusetts each face $1.2 billion gaps. Arizona's gap for 2009 is estimated at $1.7 billion.

Compared to California's fiscal problem, Arizona's looks like chump change. But here's "the rest of the story." As a percentage of general revenue spending, Arizona's 2009 spending/revenue gap is the biggest of all the states'. California's gap is 14 percent of its budget. New Jersey's is 11 percent. Arizona's spending/revenue gap for 2009 is 16 percent of the state's general fund spending.

Despite being a cool billion short on the current year's budget, Governor Napolitano and some members of the legislature have proposed budget "cuts" that amount to leaving unspent funds unspent and vacant jobs vacant. Meanwhile, the governor's budget office is predicting future revenue growth almost equal to that of past boom times, even as experts say the state's economic recovery will be slow. As they say in the South, "denial ain't just a river in Egypt."

Indiana's governor, Mitch Daniels (R), recently called on state agencies to cut spending by five percent in response to a $231 million spending/revenue gap. Wisconsin's governor, Jim Doyle (D), ordered agencies to cut spending by $111 million.

Here we are, facing a billion dollar hole after double-digit percentage budget growth in four of the last five years and some of our policymakers can't bring themselves to cut spending by more than one-half of one percent ($100 million over two years). Delaying the inevitable will only make it that much more painful.

Dr. Byron Schlomach is the director of the Center for Economic Prosperity at the Goldwater Institute.

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