Government Spending

Why State Budgets Are in the Crapper (Hint: It's Not the Economy)

|

Author's update: An astute reader, which is to say one who, unlike me, had had some coffee before perusing the screen and can tell the difference between a 3 and an 8, points out that this story I posted here is actually five years old. Apologies for that mistake, but in the interest of openness, I'll leave it up while I see if I can find any current stories on the same matter. 

USA Today has analyzed why so many states are in serious budget meltdowns. The answer, it turns out, is not that the national economy has tanked, or even regional economies have hit the skids:

The financial problems racking many state governments this year have less to do with the weak national economy than with the ability of governors and legislators to manage money wisely.

That is the key finding of a USA TODAY analysis of how the 50 states spend, tax and balance their budgets—or don't.

The National Governors Association says states are suffering their worst economic crisis since World War II. But for many states, the analysis shows, the fault is largely their own.

Some states that have enjoyed handsome growth in tax revenue nonetheless have huge budget shortfalls. At the other extreme, some of the best-managed states suffered sharp declines in tax collections but promptly took painful steps to balance their books.

Utah, Georgia and Delaware are the best financial stewards, according to the USA TODAY analysis of the states' financial performance. The key to their success: restraint. During the economic boom of the late 1990s, these states limited both spending growth and tax cuts. After the economy weakened in early 2001, they acted swiftly and decisively to keep their finances sound.

California, the worst-performing state in the analysis, did the opposite.

Don't expect the current situation to change the way most states do business.

State spending keeps growing.

It went up 6.3% for the fiscal year that ended June 30, 2002, and it's on track to rise about 5% in the 12 months that end June 30. The number of people on Medicaid, which pays for health care and nursing homes for the poor, remains at a near-record 40 million. That number is up 30% since 1998, the result of efforts to sign up people who qualify. And despite anecdotal reports of layoffs—Oregon furloughed 130 state troopers, for example—state governments have added 74,000 workers (an increase of 1.5%) in the past two years while the private sector has registered a net loss of 2.6 million jobs (a decline of 2.4%).

Whole thing here.

NEXT: Change We Can Remember

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Umm, the link goes to a story that’s five years old.

    Now I don’t doubt that the conclusions are true but conditions are a little different now, to say the least.

  2. Don’t worry Gillespie — just take out the final paragraph and you would never know the difference b/t 2003 and 2008.

  3. We are in the situation we are because we have a MORON in the white house. Bushes Regime cares only for the rich and for Global Domination. Nothing more. Dictator Bush has lied to the sheeple over and over for the sake of personal gain (He is one of the rich). Pretty pathetic. Sooner we get him out, the better off we will be. Obama is already setting things in motion to REVERSE much of what Bush and his cronies have done.

    Jess
    http://www.anolite.echoz.com

  4. The financial problems racking many state governments this year have less to do with the weak national economy than with the ability of governors and legislators to manage money wisely.

    Thank you, Captain Obvious.

  5. Nick, look up Governor Corzine’s People’s Republic of New Jersey. That seems about as current as it gets to fiscal mismanagement as the prime driver of state budget crises.

  6. Why the hell does New Jersey hate its political leadership, yet refuse to elect anyone of the opposing party to statewide office?

  7. I never voted for Corzine. I rather liked Doug Forrester when he ran against JC and cast my vote for him, but Forrester’s campaign was considered too far-right, unfriendly to the elderly (in re his plan to restructure prescription drug benefits for elderly and welfare recipients), hostile to schools (school funding was a minor issue to his campaign but the NJEA seized it as a reason to campaign negatively against him).

    I’ve become more aware of state level politics in the past 5 years or so and it seems that incumbents keep getting voted in over and over. I don’t know if its voter apathy, powerful lobby, or a combination of both, but corruption is rampant in our government and those who can recognize it and want to change it make up a smaller portion of the voter pool than those who keep the status quo.

    All of the above is pretty much obvious, of course. NJ has some powerful lobbies and generally trends Democrat for all major elections. We have a large population of minorities, immigrants, elderly, and urban students who fall under Abbot, and the lobbies successfully convince the voters that these groups will loose every entitlement they have if they do not vote “blue.”

    As much as I fear Corzine becoming Treasury Secretary (a job he hopes to secure under the Obama admin), I hope he goes anywhere but the NJ statehouse for another term as governor.

  8. That should be “lose” not “loose” above.

  9. The story is five years old, but this line is telling given what we’re constantly told about the current “economic meltdown”: “The National Governors Association says states are suffering their worst economic crisis since World War II.”

  10. Johnny B Goode: Wow, I didn’t realize Bush has been in control of all those state budgets. I suggest you set aside posting here and begin informing governors and state legislators of the TRUTH.

    Seriously, though, one problem is that to the average voter, pretty much all state spending is “good.” Who wants to be against education, or good roads, or the elderly, or law enforcement, or the environment? Careful libertarian explanations of how government spending on a problem doesn’t necessarily solve the problem efficiently, may not solve it at all, and may make it (or some other problem) worse are difficult to make to people who think more money for problem X = solution to problem X.

    Combine that with government employee unions, standard bureaucratic inertia, and political backscratching/cronyism/corruption, and here we are.

  11. Who wants to be against education, or good roads, or the elderly, or law enforcement, or the environment?

    [Raises hand, slowly looks around, lowers hand, edges out of room]

  12. state governments have added 74,000 workers

    This must be a misprint. King County alone hired 74,000 workers during their recent “hiring freeze”.

Please to post comments

Comments are closed.