Senior Director of State Policy Initiatives
Governors across the country have released their budgets for the coming fiscal year.
Erica Williams, Policy Analyst with the Center’s State Fiscal Project discusses the good, the bad, and the ugly of every governor’s budget proposal.
[audio:http://www.cbpp.org/files/2011-04-05_Govs-Bud.mp3| titles=Podcast: Governors Budgets Proposals: The Good, the Bad, and the Ugly ]
Erica, states are facing serious problems right now in terms of depressed revenues, rising human needs, depleted reserves, and the end of temporary federal aid. How are governors handling this challenge?
Unfortunately, many governors are not handling it well. The majority of governors’ budgets rely entirely on cutting funding for services, like education and health care, instead of using other available tools, even though states have more kids to educate and more people who need health insurance.
For example, Ohio’s Governor John Kasich proposed to cut aid to local governments and libraries by more than $1 billion, reduce higher education funding by 11 percent, and K-12 funding by 10 percent. That’s the equivalent of more than 16,500 full-time teachers’ salaries. His budget would also cut payments to health care providers that serve Medicaid beneficiaries by more than $700 million, among other cuts. Yet his proposal contains no significant new revenues.
That’s troubling. But you found that some governors are doing even worse. Can you tell us about that?
Sure, Shannon. On top of these cuts, some governors are making their states’ financial situations worse by proposing tax cuts, which would decrease revenues even further.
For example, Governor Rick Scott in Florida wants to cut the corporate income tax nearly in half in the coming fiscal year, which will cost the state an estimated $459 million. His plan would eliminate the tax by 2018. At the same time, he is proposing large spending cuts in education, health care, and other vital services.
Are all states taking this type of cuts-only approach?
The good news is that some governors are making better choices.
Seven governors have proposed raising taxes to replace a portion of the revenues lost due to the recession.
And while these governors are also cutting services, their revenue proposals reduce spending cuts needed to balance the budget.
So given all this, what’s the main takeaway for state policymakers?
The bottom line is really that while states are in serious trouble because of the steep decline in revenues brought on by the recession, relying only on drastic service cuts is not the way to solve budget problems. States can get themselves out of budget holes by taking a balanced approach that includes revenues.
So in states where governors are taking a balanced approach, lawmakers should follow the governor’s lead. And in states where governors are proposing a cuts-only approach, legislators should turn to revenue-creating measures to meet residents’ needs.