State budgets - Where the money really goes

Friday, May 16, 2003

Anyone who has been paying attention to deliberations in the Missouri Legislature these past few weeks knows that most of that time and effort have been devoted to crafting a budget for the fiscal year that begins July 1.

Like all other states except Vermont, Missouri is constitutionally required to have a balanced budget. That means legislators must produce a budget whose appropriations are matched by anticipated revenue. And, like most other states, Missouri's budget relies on assumptions that, in these times of economic squishiness, are far from reliable.

It is this unreliability of financial forecasts -- estimates of what the economy will produce months from now -- that makes state budgets such iffy documents. In Missouri's case, today is the deadline for coming up with legislation aimed at producing enough revenue to cover the $19 billion spending plan that has already been approved. Even with a "balanced" budget, Missouri could wind up with far less revenue than anticipated. State agencies have grown accustomed in the last three years to withheld funding and outright cuts. Question: Even with those cuts, have Missourians really suffered?

$78 billion of red ink

Missouri isn't alone. Across the country, most states are struggling to find enough revenue to pay the bills. It is estimated that, collectively, state governments face $78 billion of red ink. What worries most legislators and governors as much as not having enough money this year is the very real possibility that the situation will be even worse next year.

In some cases, future problems are being created now just to get budgets passed. States are borrowing money that will have to be repaid -- with interest -- to pay for next year's budgets. And states are making cuts that will, in many cases, have to be restored sometime in the future.

Even though today is the deadline for Missouri's legislative session, the possibility exists that there will be a special session if Gov. Bob Holden vetoes any of the budget bills. As we've said before, that wouldn't be prudent. Other state legislatures, however, have had extended sessions -- Idaho just finished its longest session ever -- to cope with budget matters. Special sessions are on tap in other states.

The commonsense approach

A good many taxpayers, using the common sense of a wage earner who has to pay his family's bills out of his paycheck, have advised government leaders at every level -- city, county, state and federal -- to do as they do: Live within their means. And that's what most families think they do, although in reality they often turn to credit-card debt and other sources of income to get by. But these practical advice givers mean it when they say governments should adjust spending habits to reflect anticipated income.

The problem is that most governments are a collection of families, and if you maintain or increase spending for one family, you have to cut spending for other families. As a result, the hallways of the Capitol in Jefferson City have been lined this week with lobbyists -- think of them as family retainers -- intent on making sure cuts occur anywhere but within their own family.

One aspect of government budgeting that rarely gets looked at closely is who is affected most by budget cuts. Special-interest groups will say it is you, Mr. and Mrs. Average Citizen, and your children who are hurt by cuts. And that's the way it usually turns out. But the cuts should have less impact on citizens and more impact on bureaucracies. As any state seriously interested in reducing the cost of doing business knows, there are still millions -- or billions -- of dollars being wasted on government black holes that produce little real benefit for the Average Citizen family.

Sloppy, too little oversight

Before the budget crisis of next year or the years to follow is resolved, elected officials will have to come to grips with the fact that government, by and large, is sloppy and operates with inadequate oversight on how well each tax dollar is put to use.

Until then, expect to see more headlines about budget crises and forecasts of financial disaster.

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