Government Spending

How States Fail (Fiscally)

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Good, long, and detailed account from The World magazine of some of the specifics of how American states fail and succeed with their budget and tax policies in maintaining some level of fiscal solvency. As should be no big surprise to Reason readers, taxing and spending are not really good ideas if balancing budgets is the goal.

The story focuses on Virginia and Maryland, New York and New Jersey, Indiana and Illinois, and Arizona and California. It  is full of tales of hungry unions, hapless governors, short-term accounting tricks, and in general governments whose long-term stability depends on keeping spending under control–even as federal policy discourages them from doing so. For example:

One of the biggest obstacles Arizona (and by extension every cash-strapped state) faces in solving budget problems is the federal government.

Though the federal healthcare bill was not signed until after Arizona's 2010-2011 budget was finalized, the new regulations it imposes will strip the state of federal healthcare funding if it attempts to carry out the Medicaid cuts outlined in the new budget. This requirement, known as "maintenance of effort," has prompted Brewer to push for Arizona to join other states in bringing a lawsuit against the federal healthcare overhaul. Martin says that the new federal legislation may make many of the state-level debates on how to cover the shortfall moot: "The healthcare mandate blows a billion-dollar hole in our budget."

Similar federal regulations are in place to deprive states of matching funds if they try to cut spending on education. The fact that the two areas covered by maintenance of effort—education and healthcare spending—also happen to be every state budget's biggest expenditures puts states even more squarely between rocks and hard places. But soon, Schlomach warns, it may not matter what the administration mandates: "Quite frankly, we're at a point where we can't afford to spend enough to get the federal money."

Read early and often this May 2009 Reason magazine classic on why state's budget problems are a result of state spending binges.

NEXT: Everything Man-Made (Except Cell Phones) Gives You Cancer, Says Presidential Cancer Panel

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  1. Good, long, and detailed account

    Is that why there are no comments?
    Just sayin’.

    1. good and long

  2. You can only eat yourself for so long before you’re dead; we’re there. The states’ starving, to a point of dumping workers, is fantastic news in my book. The sooner the looters learn their lessons (assuming they ever do), the better. I want to get on with rebuilding, but not w/o a moral revolution that puts an end to altruism / sacrifice once and for all. Otherwise, it’s just limping along in agony.

    1. Put differently–pigs get fat and hogs get slaughtered.

  3. It’s really just the federal government trying to cover up its insanely spendthrift ways by holding states hostage with the money extracted from their own taxpayers. As Mark Steyn noted, 10% of the funding still gets you 100% of the control.

    Just one more milestone on the road to insolvency brought about by the Central State slipping its constitutional leash. We had better get this dog back into its kennel before it shits on all our lawns.

  4. What is this “Federal” money? Some sort of magical, never-ending fountain of wealth, apparently.

    1. Oh, yeah, it’s really cool!

      They just print more, so as long as we have paper, we’re fine.

      1. You’re so 20th century. We don’t need no paper no more. The One says “a trillion”, Bernarke says “a trillion”, Congress spends a trillion and a half. That’s all, no paper.

  5. The moral rot is the desire of voters to spend Other People’s Money.

    The spending must be cut. It should be easy, in a “rich state” / rich country, to reduce spending — why is the gov’t spending so much on the rich???

  6. This Administration is reminding me of the Blonde joke that goes “We can’t be out of money in the checking account, I still have checks left.”

    On November we take their checkbook away from them.

  7. Ya’ll ain’t seen nothing yet!

    OsamaHusseinIslamObama 2012?
    (the terrorist-Uighur-ACORN-media choice)
    -It’s never too early to campaign-

  8. >>> we’re at a point where we can’t afford to spend enough to get the federal money.”

    This is by design. The federal government wants to coolect and keep money so its employees can retire at 50. They have no interest in actually providing states or the people with any benefit.

  9. Notice they don’t even bother to address California, because our Legislature continues to have their heads buried as deep as they can reach.

    We are so screwed. Only media that even will mention the subject is John and Ken’s radio show on KFI.

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