Posted on 05/07/2003 2:34:16 PM PDT by NormsRevenge
To hear the nation's governors talk, these are the worst of times for state governments. The sluggish economy has dried up revenues and blown huge holes in their budgets. According to the National Governors Association, states face the deepest fiscal crisis since World War II. Hard times have forced ''substantial cuts'' in spending, governors say, and prompted many to raise taxes.
On Tuesday, Michigan's state representatives were ordered to take a 3% pay cut. Despite such actions, billion-dollar budget gaps loom for many states. Congress is listening to their pleas. This week it is considering whether to include $30 billion in state aid as part of a tax-cut package.
But before families send billions of their federal tax dollars down the government food chain, they deserve an answer to this question: If the fiscal picture is so dire, why are states still spending so much money? The latest Commerce Department (news - web sites) data show revenues coming into state and local coffers rose a healthy 5.4% the first three months of 2003, compared with the same period last year. They spent that and more, hiking outlays by 6%. That's on top of a 13.4% spending hike between 2000 and 2002.
States complain that these spending figures are misleading because they include bills paid with local revenues and federal grants, both of which have been increasing. But a USA TODAY analysis found that just 18 states trimmed spending last year in their so-called general fund budgets. These pay for such things as education and health benefits for the poor and amount to about half of total state spending. Most of the cuts came after big spending increases the year before. Connecticut, for example, trimmed general fund spending 2.4% last year, after boosting it 9.5% in 2001. For the rest, the ''substantial'' reductions governors complain about aren't cuts in any common sense of the term. If a state planned to boost spending 14%, but pared it back to a still-healthy 4%, the difference is described as a deep cut. That's like a worker griping about a $5,000 raise because he'd budgeted for a $50,000 one. Even if states manage to hold spending steady overall this year, as the governors expect, that's still no ''cut.''
State officials also note that much of their spending growth is due to Medicaid, the health care program for the poor, which is jointly funded by states and the federal government. True, Medicaid spending grew 13% last year, a fact that has left states struggling to control costs. And states face new homeland defense costs. But such growth doesn't explain why states continued to boost employment and failed to control other costs during the economic slowdown.
What has changed for states in the current economy is that they can no longer count on the lottery-size revenues pouring out of a booming economy and sizzling stock market. Countless families already have faced up to this new reality, making real spending sacrifices. Of course, families can't count on Uncle Sam to bail them out.
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