budgetcut

Mid-year budget cuts to state agencies in recent years have become chronic. Whenever a problem becomes chronic it is time to do something about it.

There’s nothing on the economic horizon to indicate that mid-year cuts will not be recurring.

Background

Not that the current method of allocation of our tax dollars by the leges is any great shakes, but mid-year reductions exacerbate the problem.

First, the mid-year cuts are required to be made across-the-board as opposed to selective reductions during a lege session.

That is the worst form of budgeting for government. It punishes the agencies that are performing well and rewards those that are wasting money.

Second, with mid-year cuts the state agencies have very little time to react.

Under normal circumstances, any agency head paying attention to the lege budget process has months to prepare for possible budget reductions. With mid-year cuts, they only have days or, at best, a week or so to prepare. That usually results in hardships for those the agencies are supposed to serve.

The culprit

It appears that the primary culprit in the recent mid-year cuts is due to over-estimating state revenues by the State Revenue Estimating Conference (“REC”).

Despite the sophisticated economic models available to the Legislative Fiscal Office and Division of Administration, estimating government revenues is not an exact science. The models still require certain assumptions to be plugged into them.

If those doing the estimating were able to precisely predict future revenues, they would likely not be working for the state, but would be making a fortune investing in the stock market.

A solution

A formula should be adopted by the leges to take into consideration prior mid-year budget cuts.

All it will take to eliminate the mid-year cuts is leadership and political courage by the leges. They have to be willing to say “no” to those who want to spend money that the leges know will only be taken away later.

The estimate of state revenues by the REC for the upcoming fiscal year should be reduced by the average of the 3 previous years’ mid-year reductions.

The worst outcome of the formula would be a surplus of state funds. Such surplus funds could then only be used to reduced the state retirement systems’ unfunded accrued liability; pay off state debt or for capital projects (rebuilding the wetlands, highway construction, etc.).

Mine is just a common sense approach to a problem. Unfortunately, common sense isn’t that common at the Capitol.

If you don’t like my solution and have a better idea, please suggest it to the leges. Ignoring the problem as is currently the case isn’t a solution.

C.B.