States Ask Uncle Sam to Spare a DimeCommentary by Pete du Pont
January 28, 2003
"A promising young man should go into politics so that he can go on promising for the rest of his life." I got to thinking about this quote from author and humorist Robert Byrne the other day when reading about the plight many governors and state governments find themselves in.
According to a report published this fall by the National Governor's Association, faced with declining revenue states have had to slash spending, leading to lost jobs and fewer government services. They argue that most states have exhausted budget cuts and must now receive help.
To hear them tell it, states face the biggest financial crisis since the Great Depression and can only be saved by a huge bailout from the federal government. Their allies in Congress have proposed just that, with Senate Minority Leader Tom Daschle recently calling for a $40 billion fiscal relief package for states and local governments.
As a former Governor I can sympathize with what these local governments are going through. It's not easy making the tough choices needed to balance their respective budgets. But that is precisely what Governors and state legislators are elected to do.
Yet one does get the sense that many states may be bending the truth just a little. According to an informative report in USA Today, most state and local governments are spending more money and hiring more people this year than last year. And governments use an age-old deceptive strategy: a smaller spending increase than originally intended is labeled a budget cut.
The problem facing many state budgets is that too many of them were created using rose- colored glasses and long lists of promises. In other words, their wound is self-inflicted. State governments have spent and spent and spent.
Here's a quick look at some of the facts. As the nation was slowly attempting to pull itself out of a recession, states continued to spend - up 1.3 percent in Fiscal Year 2002. While a far cry from the 8.3 percent increase that occurred during fiscal year 2001, it's still an increase. The truth is that state and local governments have increased spending nationwide every year since 1944 - in good times and in bad. And spending has grown faster than the rate of inflation every year since 1982.
But while spending has increased, states have budgeted for spending on an even grander scale. For example, 37 states had to reduce their 2002 enacted budgets by more than $12.8 billion after they were passed. Another 23 states plan to reduce their net enacted budgets by more than $8.3 billion.
States have had to scale back their budgets because they failed to recognize that it's harder to raise revenue during lean economic times than during times of economic boom. For example, in fiscal year 2002 sales tax collections were 3.2 percent lower overall than originally budgeted, personal income tax collections missed states' targets by 12.8 percent and corporate income taxes were 21.5 percent lower than expected.
As USA Today noted, some states were more optimistic than others. Minnesota, for example, approved a spending blueprint based on an expected 13.4 percent increase in tax revenue over the next two years, while tax collections are really only expected to rise 6.6 percent. That means Minnesota will have to increase their spending $4.6 billion less than they had originally planned to. In all, 41 states collected less revenue in FY 2002 than they planned, while only six states did better than expected.
And contrary to the rhetoric, states are not laying off government workers right and left. While there are certainly some exceptions, states hired about 31,000 more workers in December than a year earlier, and local governments employed 189,000 more workers - both are historic highs. By contrast, the private workforce shrank by 467,000.
The fact is governments remain one of the healthiest segments of the nation's economy. They are growing and spending at a time private businesses are having difficulty making a profit.
As Calvin Coolidge was fond of saying, "There is no dignity quite so impressive, and no independence quite so important, as living within your means." It's time for those in state government to start showing some independence and dignity.