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Decent Article on State Budget Problems

BaliBabyDoc

Lifer
Jan 20, 2001
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Surprisingly long for Yahoo

(select excerpts)
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.

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. It approved huge spending increases and tax cuts during the boom. When the economy soured, the state began borrowing money and using accounting gimmicks to avoid its day of reckoning. Today, it continues to spend $1 billion a month more than it takes in.

* The healthiest states avoided big tax cuts during the economic boom. The conservatively managed states of Utah, Georgia and Delaware have cut taxes and fees at half the national average since 1997, USA TODAY found. But tax cuts had mixed effects elsewhere. Hawaii cut taxes, but it also cut spending and is in better shape than it was five years ago. New York, in contrast, slashed tax rates at the same time that it was sharply increasing spending. It is now borrowing and raising taxes.

* Divided government promotes fiscal restraint. States spend more when the same party controls both the legislature and the governor's mansion. States increased spending 6.8% annually from 1997 through 2002 when one party controlled state government, but only 5.9% when control was divided, USA TODAY found. That might seem a small difference, but because of compounding, the effect on a budget can total hundreds of millions of dollars after a few years.

On another front, tax cuts were only half as big when government was divided.

Polls show that voters want to cut state spending in theory, but not in practice. In a USA TODAY/CNN/Gallup Poll, 79% said they preferred spending cuts to tax increases to balance state budgets.

Those who favored spending cuts were asked whether they were willing to cut education funding: 77% said no. On health care funding, 78% said no. Education and health care make up about two-thirds of state spending, so balancing budgets by cutting spending is nearly impossible if those programs are off limits.




 

BaliBabyDoc

Lifer
Jan 20, 2001
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OK, you did not read the article very well. It is an unambiguous indictment of excess spending, excess tax cuts, AND political duplicity. All three factors play integral roles in the poor management of state . . . and federal budget problems.

* The healthiest states avoided big tax cuts during the economic boom. The conservatively managed states of Utah, Georgia and Delaware have cut taxes and fees at half the national average since 1997, USA TODAY found. But tax cuts had mixed effects elsewhere. Hawaii cut taxes, but it also cut spending and is in better shape than it was five years ago. New York, in contrast, slashed tax rates at the same time that it was sharply increasing spending. It is now borrowing and raising taxes.
 

rahvin

Elite Member
Oct 10, 1999
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They contradict themselves. Utah was probably number one (the Utah consitution prevents the state from going into debt) and it has a completely republican government. I believe there are only 10-20 state congressmen that are democratic, it is essential a one party state.
 

CADsortaGUY

Lifer
Oct 19, 2001
25,162
1
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www.ShawCAD.com
Originally posted by: BaliBabyDoc
OK, you did not read the article very well. It is an unambiguous indictment of excess spending, excess tax cuts, AND political duplicity. All three factors play integral roles in the poor management of state . . . and federal budget problems.

* The healthiest states avoided big tax cuts during the economic boom. The conservatively managed states of Utah, Georgia and Delaware have cut taxes and fees at half the national average since 1997, USA TODAY found. But tax cuts had mixed effects elsewhere. Hawaii cut taxes, but it also cut spending and is in better shape than it was five years ago. New York, in contrast, slashed tax rates at the same time that it was sharply increasing spending. It is now borrowing and raising taxes.
OK, I did read the article well ;) States feeling the biggest hurt were the ones who vastly increased spending;)
"But one thing has remained constant throughout the crisis: State spending keeps growing." - from the article:D

Key findings by USA Today(using many sources of data)-"Spending growth during the boom years haunts some states today. State spending was 38% higher in 2002 than in 1997 -- $983 billion vs. $710 billion. That was 18 percentage points higher than inflation and population growth combined during the period. This shows that policy decisions -- not just higher costs and more people -- drove spending to record levels.
...
On the other hand, states that were frugal during the boom are generally in the best shape today."
-from the article

Yeah there are other contributing factors but the cause of deficits IS SPENDING!!!

CkG
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
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California, the worst-performing state in the analysis, did the opposite. It approved huge spending increases and tax cuts during the boom. When the economy soured, the state began borrowing money and using accounting gimmicks to avoid its day of reckoning. Today, it continues to spend $1 billion a month more than it takes in.

Calif. has prop 13 to deal with. No tax increase without 2/3 majority vote. The real issue is the economic policy of the Central Government. The legislature was taken in by the Bushenomics... poof... no change.
Laffer said the other day... thank god for prop 13...
Let the rich be taxed to the fullest once again... let the rich brigde the gap.. yeah.
 

BaliBabyDoc

Lifer
Jan 20, 2001
10,737
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It's amazing how people can see ONLY what they want to see. CAD, you are right in that deficits are a function of spending in excess of income but if you reduce income while spending remains stable what caused the deficit . . . excess spending?


rahvin, it's not contradictory. Utah is a bastion of the GOP but Georgia and Delaware were either solidly Democratic or biased towards the Democrats during the period of study. These three states were exceptions NOT the norm when it comes to budgetary prudence despite the fact one party controled the Lege/Exec. I imagine in the raw analysis you will find GOP-dominated states cut more taxes while spending grew significantly but less than Dems. Dem-dominated states cut taxes while spending grew even more than the GOP states. Both MOs effectively reduced state revenue while increasing state liabilities. Furthermore, states with single party leadership were less likely to take bold steps to reduce their budget imbalances b/c tax increases or spending decreases rarely curry favor with the voters. It's disingenuous to pat Republicans or Democrats on the back for the select actions of Republicans in Utah and Democrats in Delaware, respectively.

On balance states with mixed party control were more likely to cut less taxes and increase spending less. I believe Clinton's presidency is a great example of this effect. If the GOP had its way tax revenue would have been curtailed in 1994-2000 by a range of tax cut proposals. Both Clinton and the GOP wanted to spend exorbitantly but they typically compromised which provided a modicum of budgetary restraint. The US government (sort of) produced surpluses over the interval b/c tax cuts were restrained while the aggregate tax burden did not produce a drag on the economy.

 

CADsortaGUY

Lifer
Oct 19, 2001
25,162
1
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www.ShawCAD.com
Originally posted by: BaliBabyDoc
It's amazing how people can see ONLY what they want to see. CAD, you are right in that deficits are a function of spending in excess of income but if you reduce income while spending remains stable what caused the deficit . . . excess spending?
Is that the case? ;) No, infact it was the exact opposite for the states with the biggest problems. The article states that states that showed discipline in regards to increased spending are the most well off. Obviously if you cut revenue(taxes) you make the matter worse but the underlying problem is spending. I'm not ignoring the other factors as you seem to think I am - I am merely stating that MY opinion and the way the article reads is that the Spending was the big factor in the budget crunches.
"In the boom, governors and legislatures gave people what they wanted. In the downturn, people will decide whether to pay for it."-last sentence

Whatever though BBD - the overall big picture is that the states are responsible for their own demise.:)

CkG
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
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CAD,
Whatever though BBD - the overall big picture is that the states are responsible for their own demise.

*********

I disagree with your Cadification in that the economic stimuli of the Fed, Congress, Prez has a lot to do with the states.. seems that is where the people live..;)
 

CADsortaGUY

Lifer
Oct 19, 2001
25,162
1
76
www.ShawCAD.com
Originally posted by: HJD1
CAD,
Whatever though BBD - the overall big picture is that the states are responsible for their own demise.

*********

I disagree with your Cadification in that the economic stimuli of the Fed, Congress, Prez has a lot to do with the states.. seems that is where the people live..;)
? The Fed increased made them do it? Buahahaha! :p Sure there are things that are getting mandated to the states to pay for but that didn't make them all go bankrupt? How did the states that are sitting relatively OK do it then? It would be interesting to see how much those "mandated" things increased their budgets in comparison to the states own elective spending increases though.

CkG
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
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Originally posted by: CADkindaGUY
Originally posted by: HJD1
CAD,
Whatever though BBD - the overall big picture is that the states are responsible for their own demise.

*********

I disagree with your Cadification in that the economic stimuli of the Fed, Congress, Prez has a lot to do with the states.. seems that is where the people live..;)
? The Fed increased made them do it? Buahahaha! :p Sure there are things that are getting mandated to the states to pay for but that didn't make them all go bankrupt? How did the states that are sitting relatively OK do it then? It would be interesting to see how much those "mandated" things increased their budgets in comparison to the states own elective spending increases though.

CkG
Bushenomics promises to end the problem ... so ... how did it start... Clinton right! Davis is neither clinton nor bush nor greenspans boys nor congress... the spending is in line with needs and population growth... so my numbers tell me... and I listen to those as I see all sorts of cuts going on.

 

Hayabusa Rider

Admin Emeritus & Elite Member
Jan 26, 2000
50,880
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So, did anyone factor how unfunded federal mandates affect this? Homeland security screwed mass recently. We got some of that back, but not all.
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
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Originally posted by: Hayabusarider
So, did anyone factor how unfunded federal mandates affect this? Homeland security screwed mass recently. We got some of that back, but not all.
Hay,
That is all an illusion. The mandated OT for all the state police when we're oranges and the illegal issue and all they consume here.. that's all Davis' fault too... according to some he should have budgeted for it.. Or it's in the trust fund and they owe us.

:confused:
 

BaliBabyDoc

Lifer
Jan 20, 2001
10,737
0
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"In the boom, governors and legislatures gave people what they wanted. In the downturn, people will decide whether to pay for it."-last sentence

Whatever though BBD - the overall big picture is that the states are responsible for their own demise
CAD, you are still being selective. My interpretation of that sentence is in reference to cutting taxes AND increased services. The people never say . . . raise my taxes OR decrease services. States, like TX, had huge surpluses as a function of relatively stable tax liability, significant growth, and moderate spending inflation. TX is a great example of how mixed control worked. The governor (GWB) always asked for huge tax cuts and the Lege approved significantly less. Despite the fact Bush claims he advocated increased funding for schools it was often a compromise position so he could get his tax cuts. Everybody in TX took credit for reducing taxes and increasing services but the writing was on the wall as early as late 1999. TX meets every other year but their leadership made no attempt to fix the impending shortfall . . . other than run for President and cook the books. In TX one of the largest outlays is for Medicaid/Medicare related costs. Despite the 24 month budget cycle, Ws state agency produced a budget for 23 months . . . leaving a nice floater for his successor.

As for your last statement I agree. The states (just like the feds) are responsible for poor budget management/planning. Irresponsible spending and tax cuts will produce a lot of unnecessary hardship for years to come . . . except of course occupants of the top tax brackets or anyone with significant capital gains . . . curiously those two demographics often overlap.
 

BaliBabyDoc

Lifer
Jan 20, 2001
10,737
0
0
Bushenomics promises to end the problem ... so ... how did it start... Clinton right! Davis is neither clinton nor bush nor greenspans boys nor congress... the spending is in line with needs and population growth... so my numbers tell me... and I listen to those as I see all sorts of cuts going on.
I would have to agree with CAD on this one . . . sorta. CA expanded SCHIP to provide health insurance to children, Medicaid for others, and mandated reduced class sizes. I agree with the first two but not the last as effective. This dramatic expansion in state liability was matched with tax cuts. When the economy turned sour the rolls of SCHIP and Medicaid grew while revenue continued to fall . . . not to mention the extra costs of the de-regulation debacle. CA got caught with one hand in the cookie jar and one hand scratching their arse. Leadership failed CA but the BS ballot initiatives are just as lame and shortsighted as the pols in Sacramento.
 

CADsortaGUY

Lifer
Oct 19, 2001
25,162
1
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www.ShawCAD.com
Originally posted by: HJD1
Originally posted by: Hayabusarider
So, did anyone factor how unfunded federal mandates affect this? Homeland security screwed mass recently. We got some of that back, but not all.
Hay,
That is all an illusion. The mandated OT for all the state police when we're oranges and the illegal issue and all they consume here.. that's all Davis' fault too... according to some he should have budgeted for it.. Or it's in the trust fund and they owe us.

:confused:
Like I said - it would be really interesting to see exactly how much the mandates really did add to the state budgets and then compare it to what the states increased spending on.

BBD - Selective? That sentence does not mention cutting taxes, it only mentions spending and the possible increases. I agree that states that gave huge tax-cuts screwed themselves though - it is just that the way the article reads it puts emphasis on spending increases.

Seems we agree but arrive at that similar conclusion through different paths.:p Whatever:p

CkG
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
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Originally posted by: BaliBabyDoc
Bushenomics promises to end the problem ... so ... how did it start... Clinton right! Davis is neither clinton nor bush nor greenspans boys nor congress... the spending is in line with needs and population growth... so my numbers tell me... and I listen to those as I see all sorts of cuts going on.
I would have to agree with CAD on this one . . . sorta. CA expanded SCHIP to provide health insurance to children, Medicaid for others, and mandated reduced class sizes. I agree with the first two but not the last as effective. This dramatic expansion in state liability was matched with tax cuts. When the economy turned sour the rolls of SCHIP and Medicaid grew while revenue continued to fall . . . not to mention the extra costs of the de-regulation debacle. CA got caught with one hand in the cookie jar and one hand scratching their arse. Leadership failed CA but the BS ballot initiatives are just as lame and shortsighted as the pols in Sacramento.
If California's revenue inflow actuals were at projected we would not be in deficit. The estimates did not consider the current economic conditions. It is a double dip. No income tax revenue and many are now drawing food stamps or general welfare too. The spending side is in line with expectations and law. Fix the economy and you fix the problem... Ok I agree when this then that... but, in '01 we got a tax cut stimuli that did not turn anything around now another and still sluggish going.. We will take care of the kids and let the chips fall. The rich Republicans want spending cuts but not tax increase... why not put tax rates back to where they were first.
 

Hayabusa Rider

Admin Emeritus & Elite Member
Jan 26, 2000
50,880
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Thanks for the link Charrison. Gives me a place to start on this.

I do know there is a difference between the feds saying a thing is funded, and the states having it in their hands. Warrants a closer lood by me :D
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
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PDF Go to page 11

the above is the link to California's Budget. You will see that the budget cuts spending without raising taxes. Additionally, the deficit is due to the economic conditions that the Bush/greenspan stimuli are intended to correct. If corrected there will not be a problem anymore. If the latest misdirected stimuli fails to do as promised then California (10% of the nation's population) will be still in the bucket.
 

BaliBabyDoc

Lifer
Jan 20, 2001
10,737
0
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Yeah but CA is essentially tweaking and cheating when what they really need is dramatic correction. No intelligent person is planning for a revival of the late 90s boom. CA must dramatically cut back services (particularly superfluous ones) and augment revenue (increase taxes and fees) to balance its books. They should certainly collect a couple of billion from energy companies as well.

In any case, CA has not come to terms with their budget debacle. Gray Davis is certainly partially responsible for the CA mess but every Californian participated in the fall . . . from Davis' GOP detractors to the very same people signing recall petitions. If it was possible to run deficits comparable to the feds well into the future I bet Davis would cut taxes and increase spending just like GWB.
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
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Originally posted by: BaliBabyDoc
Yeah but CA is essentially tweaking and cheating when what they really need is dramatic correction. No intelligent person is planning for a revival of the late 90s boom. CA must dramatically cut back services (particularly superfluous ones) and augment revenue (increase taxes and fees) to balance its books. They should certainly collect a couple of billion from energy companies as well.

In any case, CA has not come to terms with their budget debacle. Gray Davis is certainly partially responsible for the CA mess but every Californian participated in the fall . . . from Davis' GOP detractors to the very same people signing recall petitions. If it was possible to run deficits comparable to the feds well into the future I bet Davis would cut taxes and increase spending just like GWB.

This 2003/2004 budget does balance or at least it says so with a 1/2B reserve... who knows.

If you look at the drop in the income on page 11 of my link you'll see it to be the largest drop since WWII by about 8 times previous largest drop . No one should budget with that kind of expectation... even an expected drop despite the '01 economic stimuli would have held a surplus.
 

charrison

Lifer
Oct 13, 1999
17,033
1
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Originally posted by: HJD1
PDF Go to page 11

the above is the link to California's Budget. You will see that the budget cuts spending without raising taxes. Additionally, the deficit is due to the economic conditions that the Bush/greenspan stimuli are intended to correct. If corrected there will not be a problem anymore. If the latest misdirected stimuli fails to do as promised then California (10% of the -nation's population) will be still in the bucket.
California has problems, more than just what is caused by the current recession.
-They have immigration problems in the south.
-They were very hard by the dotcom bubble and their unemployment is some of the highest in the nation.
-Business are leaving for more favoriable conditions(employee cost, real estate cost, less regulation, taxes). The company my wife works for, they leaving California because they can 3 employees in Texas for the price of one in California.
-Then there is the spending problem.
 

HappyGamer2

Banned
Jun 12, 2000
1,441
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hmm, the problem mainly was/is, cut taxes and increase spending, really? come on now, don't the whitehouse that.
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
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Originally posted by: charrison
Originally posted by: HJD1
PDF Go to page 11

the above is the link to California's Budget. You will see that the budget cuts spending without raising taxes. Additionally, the deficit is due to the economic conditions that the Bush/greenspan stimuli are intended to correct. If corrected there will not be a problem anymore. If the latest misdirected stimuli fails to do as promised then California (10% of the -nation's population) will be still in the bucket.
California has problems, more than just what is caused by the current recession.
-They have immigration problems in the south.
-They were very hard by the dotcom bubble and their unemployment is some of the highest in the nation.
-Business are leaving for more favoriable conditions(employee cost, real estate cost, less regulation, taxes). The company my wife works for, they leaving California because they can 3 employees in Texas for the price of one in California.
-Then there is the spending problem.
Ee's who own homes in CA. will sell them here and buy mansions in texas... but the spending has been cut.. and cut.. even in local school districts they have stopped bus service. Now parents have to drive and while I drove and drive my kids/gkids most find that a big problem when they have no car.
 

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