July | August 2017


HOT TOPIC » State Budgets

by Mikel Chavers
It was a cost-cutting measure that didn’t stick. When Virginia shut down 19 rest stops throughout the state in summer 2009 because of budget shortfalls, officials didn’t think anybody would really notice, or really care. After all, it’s just a highway pit stop, right?
But boy did people care.
“Rest areas became a hot button issue,” said Jeffrey Caldwell, chief of communications for the Virginia Department of Transportation.
“We understand that rest areas are an amenity people have gotten used to. But we couldn’t afford to operate as many rest areas as we had. There was no easy choice here.”
So to deal with the $4.6 billion shortfall in revenue for transportation, the state closed the rest areas, hoping to save more than $7 million a year.
But Bob McDonnell, who took office as governor this year, ordered the state to re-open the highway pit stops, even though the Virginia Department of Transportation isn’t sure where to find the money to keep the lights on and the plumbing going, and to pay the custodians needed to clean the rest areas, according to Caldwell.
“We have to find $7.5 million to run those. It’s a zero sum game,” he said.
The department pulled $3 million out of its emergency maintenance reserve fund to pay for the reopened rest areas through June 30, Caldwell said.
Cuts will be made elsewhere in the budget to pay for reopened rest areas—but where was still up in the air in February, according to Caldwell, when the first four closed rest areas were reopened along Interstate 81. The others re-opened in phases in mid-March, with the final seven scheduled to be reopened by April 15.
And that’s just it. Services states have been used to providing in good years are things residents have come to expect. In the bad years, those cuts can be painful and there may not be the political will to make the cuts, experts say.
“States have tried the cut, cut, cut, approach and they’re realizing that that can only go so far,” said Sujit CanagaRetna, senior fiscal analyst with The Council of State Governments Southern office, the Southern Legislative Conference.
“My belief is that this Great Recession will result in this sort of philosophical transformation of what state government is and I think we’ll end up with a very core set of services that are limited to what state government can do just because we can’t afford to do anything else.”
So state policymakers are rethinking the role government should play.
“There may be some thinking on the part of states about what their functions can be in the future, and there will be some talk about should they do less,” said Jon Shure, deputy director of State Fiscal Project at the Washington, D.C.-based Center on Budget and Policy Priorities. “But, that’s not because they got too big, it’s because their revenues took such a huge hit because of the recession.”
Shure’s project with the Center on Budget and Policy Priorities gathers state tax and budget information.

What Can States Afford?

In Idaho, with more budget cuts looming, the Park and Recreation Board was looking to close two state parks early this year—Thousand Springs State Park in southern Idaho and the Land of Yankee Fork State Park in central Idaho.
Idaho Department of Parks and Recreation Director Nancy Merrill said the closures were almost unavoidable with the state of the budget. “When you look at ways to control your budget, you can no longer do services if you don’t have the people,” she said. The department didn’t hire 25 percent of its summer employees in 2009, she said, because it just couldn’t afford to.
It’s not the first time the state has gone down the path of closing parks, Merrill said. In 1981, because of budget cuts, the state closed three parks, two of which were reopened later, she said.
Even though state parks may not be what most call “core” services, “we realize that parks have a lot of impact,” Merrill said. Although the parks remain open for now, the department will likely suffer other major cuts.
But some say state courts certainly qualify as core services. And in California, even the judicial branch is shouldering its share of state budget cuts.
“The fiscal black hole that we’re in has not improved,” said Justice Richard Huffman of the California Court of Appeals in the Fourth Appellate District in San Diego.
The state is still grappling with the largest shortfalls in the U.S., an anticipated $14.4 billion budget gap for the 2011 fiscal year, according to figures from the Center on Budget and Policy Priorities. In fact, little known budget-cutting measures have forced the state’s courts
to shut down for one day a month, a practice that was still going on early this year, according to Huffman.
An estimated 80 to 90 percent of the state’s judges are even giving up part of their pay, either by voluntary salary waivers that fund trial court operations or through direct contributions that go to funding their own courts, according to Lynn Holton, spokeswoman for California state courts. Huffman is one of the judges voluntarily giving up part of his pay.
“You could say that if (states are) only cutting parks and rest areas, that at least it doesn’t affect whether some people will make it or not. But they’re not. They’re cutting education and health care, which obviously does have an impact on people’s future in a more tangible way,” Shure said.
Shure said some states can’t even afford their level of core services—education and health care, according to him—two areas that make up large portions of state budgets.
“With cuts of this magnitude, they are cutting core services,” Shure said. “And what concerns us most is that they are cutting services that are needed by the most vulnerable parts of the population.”

States Seek More Money

Shure is advocating states take a more balanced approach to deal with the recession. By that he means states should not cut spending alone—as they’ve been doing—but states should also raise taxes to bring in more revenue.
In fact, CanagaRetna said states are starting to raise taxes, although politically it isn’t easy, he said. In the 2009 fiscal year, states raised taxes and fees to the tune of nearly $24 billion, he said. The bulk of that came from California and New York where personal income and state sales taxes increased.
Missouri Rep. Allen Icet, chairman of the budget committee in his state, echoes the dilemma facing states. “The two options that a state has is we either cut programs accordingly to get to that balanced budget, or we go back to the people of the state, the citizens of the state, to ask for a tax increase,” Icet said.
In Missouri, the legislature could increase taxes and raise an estimated $75 million, “and obviously that’s not nearly enough,” Icet said. Although he said the legislature won’t do that, in order to raise enough revenue to pay for everything, a tax increase would have to go on the ballot in a general election, he said.
“I think we’d all agree that that proposition will never pass, so that gets us back to the first option—that’s to cut budgets.”
There’s the dilemma.
“We think the budgets that are being worked on now in most states (that) will take effect July 1, are probably going to be worse than the budgets of this current year—as bad as these budgets were—because state revenues are continuing to fall,” Shure said. And even if the nation slowly recovers, states won’t get better for a while.
“Traditionally state finances are one of the last things to turn around in a recovery because they don’t turn around until employment reaches pre-recession levels.”
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