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Podcast: Troubling Trends in Governors’ Budget Proposals

I’m Shannon Spillane and I’m here with Erica Williams, policy analyst with the Center’s State Fiscal Project, to discuss troubling trends she’s seeing with governors’ new budget proposals.

1. Erica, in recent days, many governors have released budget plans for next year.  They’re doing so amidst a continued deep slump in revenues that has left states with a combined shortfall of $125 billion. How are they proposing to tackle this in their new budgets, and are they taking the right approach?

Governors are definitely in a tough position right now. State revenues remain low, reserve funds are nearly exhausted, and Congress plans to let temporary federal aid to states expire. That said, many governors have made their budget proposals unnecessarily damaging, relying almost entirely on cuts to education, health care and other key programs, instead of taking a more balanced approach that includes tapping remaining reserve funds and boosting revenues.

2. What will these cuts mean for families and communities in those states?

To put it simply, residents will get less at a time when they need more. Although there are more children in public schools, more students enrolled in public colleges and universities, and more people in need of health insurance than there were before the recession, many states are proposing to keep spending far below pre-recession levels.  At that level, they can’t possibly meet the needs of families and communities.  And in fact there are some pretty big cuts proposed.

For instance, Arizona governor Jan Brewer proposed a budget that slashes funding for public universities, which have already raised tuition significantly, closed campuses, and eliminated departments.  Her proposal would bring per-student state funding down to 46 percent below pre-recession levels.  She also proposes to cut health insurance for 280,000 Arizonans.

Cuts like that hurt people and they also hurt the state’s economy – both now and in the long run.  In order to have a strong economy, states need a healthy, and educated workforce.

3. You mentioned earlier that some states are not using their reserve funds to address budget problems. Can you elaborate on that?

Sure Shannon.  Surprisingly, eight of the states with projected shortfalls still have rainy day funds that are intended for use in difficult times like these.  But most have refused to tap them. For example, Texas is facing a shortfall of $27 billion for the coming two-year budget period, yet the state’s initial budget proposal ignores $8.2 billion the state has in reserves and, instead, imposes even deeper cuts to school and health funding.

4. Are all governors taking such a drastic approach to balancing their budgets?

Every state is cutting services, and some very deeply, but there are a few governors who are proposing a more balanced method to getting through the budget crisis. Of the 31 states that have submitted their budgets for the next year, six of them have some measures that include raising new revenue to replace some of the taxes lost due to recession.

These proposals to raise new revenue can reduce the size of the spending cuts needed to close budget shortfalls.

5. What can legislators do to lessen the impact of this crisis on people in their states?

Legislators in states where governors propose a balanced approach to addressing budget problems should support that kind of approach as a way to limit the harmful impact the shortfalls have on the economy and on state residents.

Lawmakers in states where governors are solely relying on spending cuts to get through the budget crisis should chart a different course.  They should use all of the tools available to them to address budget shortfalls, including tapping states’ reserve funds and generating new revenue.

Relying only on drastic cuts to vital state services harms vulnerable residents, and holds back economic recovery by reducing overall economic activity.  A balanced approach can bolster economic recovery and boost state’s economies in the long-run as well.

Thanks for joining me Erica.