Budget and Spending

Stateline Midwest ~ June 2012

After many years of debate, the Minnesota Legislature has approved a plan to build a new stadium for the Vikings, the state’s National Football League team.

Under HF 2958, signed into law in May, the state will contribute $348 million to the project —...

States Strive to Find a ‘New Normal’ in Providing Services

When Jennifer Granholm was governor of Michigan, she had to make cuts in state government—a lot of cuts. “It was two terms of shrinking the size of government and dealing with the shrinkage of tax revenues … from the contraction in our economy,” Granholm said.  She cut nearly $15 billion of state spending, shrinking the size of Michigan state government by 13 percent, more than any state in the country, from the turn of the century to the end of her second term in 2011. It was necessary, but it wasn’t easy.

Fiscal conditions began to improve for states in the 2011 fiscal year. State revenue collections grew by 6.4 percent and state general fund spending increased by 4 percent following two consecutive years of declines. Additionally, the number of states making midyear budget cuts dropped from 39 states in fiscal 2010 to 19 states in fiscal 2011. In the 2012 fiscal year, states are expected to continue their recent improvement with both state revenues and state spending projected to grow. Fiscal conditions, however, remain below pre-recession levels in many states even with the recent increases. States will have to continue to make difficult decisions in the 2013 fiscal year and beyond as they contend with increased spending demands, slowly recovering revenue collections, uncertainty regarding future federal funding and long-term liabilities including pensions and retiree health care costs.

With the flow of federal funding slowing dramatically, states will need to look to Washington for flexibility rather than dollars to meet their own budget challenges.

 

Before adjourning for a two-week recess last week, the U.S. House of Representatives passed a budget proposal along party lines. The bill, sponsored by Rep. Paul Ryan of Wisconsin, outlines the House majority’s funding priorities for the 2013 fiscal year. The legislation paints a much different picture than many expected, and took a sharp turn from last summer’s debt ceiling wrangling. The proposal also could forecast dark days for states.

State budgets are getting better in 2012, but they’re not good yet.  “States are seeing an uptick in their revenues, but they’re still struggling to get back to prerecession levels,” said Jennifer Burnett, The Council of State Governments’ program manager for research services and special projects. “The 2012-13 budget cycle is going to be somewhat similar to last year. It’s going to be all about closing the gaps, trying to find the money to preserve funding for education and the growing cost of social services like Medicaid and unemployment.”

Late last week, the U.S. House of Representatives passed a bipartisan bill ending the stalemate over the payroll tax cut and assorted entitlement programs, and the Senate quickly followed suit. But the details of the bills paint an interesting picture of the political landscape as we approach the 2012 election cycle, and what may be even more important to states, the Lame Duck session of Congress that will follow it.

The bill passed by Congress would keep the payroll tax rate at 4.2 percent through 2012, instead of springing...

States could see an influx of funds for education and infrastructure in the federal  budget President Obama proposed Monday. The president’s spending plan calls for $350 billion in short-term stimulus spending and a $475 billion highway program. That includes immediate spending of $50 billion for transportation infrastructure, $30 billion to modernize at least 35,000 schools and $30 billion to hire teachers and first-responders.

Even in a non-election year presidential budget proposals are generally more about political aspiration than legislative action.  However, in the present political environment few if any of the President’s major initiatives are likely to survive Congressional scrutiny.  Despite dim political prospects, the President’s budget does offer important indications of the priorities and goals for the administration should the President win a second term.

During this time when the economy is still struggling, states seek to collect debts owed to them. Iowa created the office of state debt coordinator to assist in their efforts.

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