Finally, there is some good news about state finances.
Lawmakers in Delaware, for instance, are debating about how to spend a projected $320 million surplus. You read that right. Special interest groups are circling the money the way like ravenous sharks eying a group of unsuspecting bathers. “It’s a bonanza in Dover, as Gov. Jack Markell, legislators and special interest groups suggest seemingly endless ways to dispose of the surplus,” says the News Journal newspaper, adding that Markell wants the money to go toward jobs programs.
Delaware’s surplus seems unique in these days of fiscal austerity, but in 2006 most states were swimming in cash, about $57 billion worth. States, like everyone else, got clobbered by the recession, which caused their tax receipts to plunge and the values of their pension funds to fall. Things. however, are changing. The National Association of State Budget Officials says 35 states enacted budgets with higher general spending in fiscal 2011 versus 2010.
Happy days are being seen in Michigan, the epicenter of the somewhat resurgent U.S. auto industry. Lawmakers in Lansing got a pleasant surprise last week when state officials predicted that the Michigan would collect as much as $690 million more than was expected four months ago. The Detroit Free Press described it as the best news state government has received in a decade. Governor Rick Snyder (R) is taking a more pessimistic view than what was offered by the House and Senate fiscal agencies. His Budget DIrector, John Nixon, is quoted by the paper as saying “”It’s not like it’s a big windfall that will solve everybody’s problems.”
The good news has even hit cash-strapped California where tax revenues are coming in at more than $2 billion more than forecast. For Governor Jerry Brown (D), the timing of the windfall couldn’t have been worse. The politician, who earned the nickname “Governor Moonbeam” decades ago, is arguing that additional taxes are needed to off-set spending cuts. Sadly, California’s fiscal situation is so dire that the additional money will make much of a difference. As Bloomberg News notes, Republicans in the Legislature are not buying that argument.
“Republicans seized on the cash reports as proof the deficit can be erased without higher taxes,” the news service says. “They argued that $2 billion of the additional revenue could be used for schools to maintain spending at the level Brown proposed.”
In response, Brown has scaled back his planned tax increase though his budget plan that he is expected to present today will include plans to close 70 California state parks. He will raise income taxes on Californians for four years instead of the five he originally wanted, according to the Los Angeles Times. The higher rates would not take effect until 2012.
The situations in Delaware, Michigan and California are not unique. As the economy continues to improve, state and local government coffers will continue to fill up. Elected officials can either restore cuts to programs that have been descimated over the past few years, pay down debt or fund something new. The temptations to chuck fiscal restraint out of the window will be huge.
–Jonathan Berr
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