December 25, 2014
taxes probably won’t be raised in 2015. Good. At the state level, though,
revenue-grabbers are massing. Be on guard.
attacks on multiple fronts are probable because budget deficits plague the
“laboratories of democracy.” Predictably, the Northeast
has the worst afflictions. According to the Pittsburgh
Tribune-Review, Pennsylvania’s Democratic governor-elect “steps into office
… confronted with the same problem that Republican Gov. Tom Corbett had in
2011: a multibillion-dollar deficit left by his predecessor.” Connecticut
clipped $54.7 million in spending last month, with more to come. (The combined
deficit for the Nutmeg State’s next three fiscal years tops $3.1 billion.)
dreaming of a single-payer healthcare system, is $100 million in the hole.
State’s outgoing governor is “proud of the fact that our students lead the
nation in student achievement, that we’re number one in America in health care coverage,
in veterans’ services, energy efficiency, economic competitiveness,
entrepreneurial activity.” But Deval Patrick is not trumpeting the fact that
he’s leaving behind a serious arrearage. On analysis estimates that in addition
to the $250 million in cuts already implemented this year, Massachusetts needs
another $750 million worth of austerity.
mid-Atlantic, Virginia is shaky, but Maryland’s in crisis. The Baltimore Sun reported that during “the next 18 months, state
revenue is expected to fall nearly $1.2 billion short of … expenses.”
west, Illinois’s new chief executive said the state is “in deep, deep trouble
financially,” and warned that the “next 24 months are going to be rough.” Kansas
is scrambling to close a $279 million deficit. Nevada’s current-fiscal-year gap
is $162 million. (Moody’s is not happy.) The abyss in Arizona is $520 million
now, and $1 billion in 2016.
stock market is booming. Housing,
however slowly, is rebounding. Almost
11 million private-sector jobs have been created in the last five years.
Shouldn’t states’ books be balanced?
“should” has little connection to political reality. Some states marinate in
the deep-blue strategy of frequent taxes hikes and rampant Nanny Statism.
Others hew to the reddish approach of light taxes and common-sense regulations.
Several can’t decide which model to adopt. But all share one thing in common: an unwillingness to
cut spending. The Great Recession struck seven years ago, yet to this day, old habits haven’t been broken.
Large, permanent staff reductions weren’t made. Reforms of bureaucrats’
excessive compensation packages were achieved in a handful of states, but they weren’t
enough. (The Economist wonders
if Illinois is “America’s Greece,” scolding it for having “the most underfunded
retirement system of any state and the largest pension burden relative to state
freebies -- primarily the “stimulus” enacted in the early days of the Obama
administration -- were grabbed with glee. Where possible, taxes were hiked.
Rainy-day reserves were emptied. Worst of all, perhaps, was states’ acceptance
of Obamacare. Medicaid provides
low-quality service, and its finances are staggeringly unsustainable. But
many governors, including a few GOPers, expanded the program. The establishment
of state “exchanges” was aided by federal subsidization of initial operating
money is essentially gone,” noted the Cato Institute’s Michael
Tanner. “That was always one of the arguments about why states should not
take this route. They ended up having to pay for the costs.”
welfare -- particularly giveaways to “green” energy, agriculture, and movie and
television productions -- wasn’t trimmed. Competitive-contracting and
privatization efforts were paltry. Taxpayers continue to fund arts, culture,
and tourism bureaucracies. Transportation policy is still determined by social
engineering and wishful
thinking, not real-world mobility needs. The preschool lobby
is powerful. And college-is-for-everyone groupthink is as pervasive as
ever, fueling hugely expensive “investments” in government-university systems.
governor-elect vividly described his state’s dangerous denial: “We have drained
our checking and savings accounts, maxed out every credit card. We tapped into
the Christmas fund, the college tuition funds, and we even broke into every one
of the kids’ piggy banks. We are going to have to make some very difficult
choices, because state government cannot continue to spend more than it takes
five years ago, the Chicago Tribune
offered a harsher assessment. “Illinois,” the newspaper editorialized, “needs
an end to the mutual admiration society of public officials and public
eployees coddling one another.”
advice went unheeded -- in Illinois and elsewhere. So in 2015, expect to hear
quite a lot about the “need” for “additional revenue” to keep up with “demand”
for government “services.”
Layoffs? Pay and benefit concessions? Cue the crickets.
D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.
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