BYRON SCHLOMACH
All the protests over the less-than-adequate cuts for the 2009 fiscal year apparently have partly done their job.
Gov. Jan Brewer’s recent budget address made it clear that she is more willing to solve our budget deficit with tax increases than reductions.
At $1 billion in reductions for 2010, her proposal does not even continue the 2009 cuts that if annualized would amount to more than $1.2 billion.
Lost in the din of protests over reductions is any recognition of how we got here and the fact that current budget writers are cleaning up somebody else’s unwillingness to face reality.
Here’s a Cliff’s Notes version of the rest of the budget story:
Let’s say we have a million-dollar spending budget, but we can see we will have only $800,000 in revenue. Optimistically, we decide to ignore revenues for now and hope the money will materialize, so for seven months we spend like we have a million dollars.
At the end of seven months we’ve spent $583,000, leaving less than $417,000 to spend for the remaining five months of the year.
As we all know in our personal lives, a spending budget is meaningless without the corresponding money coming in. So realism sets in and we recognize there is really only $217,000 left to spend over five months and we decide to reduce the budget accordingly.
This is a 50 percent reduction over what we thought we were going to be able to spend. But if we had addressed this known shortfall at the beginning of the year, the budget reductions would have been only 20 percent.
This is exactly the situation Gov. janet Napolitano left for Brewer and the state Legislature in January.
State fiscal years run from July through June and as early as July 2007, tax revenues at all levels of government had begun to fall off. But for nearly a year, absolutely nothing was done to adjust. In fact, though the 2008 fiscal year that started in July 2007, that budget was not balanced until the following May – and it was done with gimmicks.
The fiscal 2009 budget wasn’t balanced the day it was signed into law and it stretches the limits of credulity to believe that Napolitano and the legislators who voted for that budget didn’t know it. Nevertheless, they put the state on track to spend at least 20 percent more than it would have the money to fund.
After the fiscal 2009 budget passed, state agencies spent as if the money really were there. Little other than a hiring moratorium was done to slow spending. In fact, by some accounts spending in some agencies accelerated.
Two things combined to produce the no-win situation current policymakers faced with the state’s 2009 budget:
First, there was the gross irresponsibility and profligacy exhibited by the original budget writers in the summer of 2008.
Second, there was the willingness of state agencies to game the system, spend while the spending was good, making it all the more difficult to cut during the remaining months of the fiscal year.
The end result is something that sours in the mouths of just about everybody. Funds that were expected to be used for certain purposes have been robbed, aggravating those who paid into them.
Spending hawks are glad to see reductions but disappointed that they weren’t larger. The spending lobby, most vocal because they have the most to lose, complain about the draconian nature of the reductions.
All things considered, our Legislature did alright for 2009. But the protests have had their desired effect, at least on the Governor’s Office.
Now, a tax increase is at the top of the list instead of at the bottom. Perhaps that’s exactly what Janet Napolitano planned all along.
Byron Schlomach, Ph.D., is director of the Goldwater Institute Center for Economic Prosperity (www.goldwaterinstitute.org).