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Red Ink Rising: The Fiscal Crisis in State Government
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20705 |
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Section : |
MODERN THOUGHT
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| Issue
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9 / 1992 |
3,421 Words |
| Author
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Stephen Moore
Stephen Moore is director of fiscal policy studies at the Cato
Institute in Washington, D.C. |
The fiscal outlook for America's states has seldom been bleaker than it is today. Gov. Pete Wilson of California says that his state is "headed toward a fiscal train wreck" if it continues its current spending policies. Gov. Mario Cuomo of New York says that they are "broke to the marrow of our bones." These two governors could easily be describing the budget outlook for over thirty-five states this year.
The deficit forecast for this year in the states is $40 billion and rising almost monthly. This may seem little compared with the federal government's $400 billion worth of red ink, but for the normally balanced-budget-minded states it is unprecedented. To close these deficits that spread across state capitals from Albany to Austin to Lansing to Richmond to Sacromento, governors will need to either raise taxes for third straight year or sharpen their budget knives and start making deep, politically painful cuts in expenditures.
How did the states ever get in such a deep budget hole? State legislators offer many explanations--all of which pinpoint the blame elsewhere. They say that the states are suffering from sharp cutbacks in federal aid over the past decade; that state governments are the victims of a national concession; that the great tax revolt of the late 1970s and early 1980s has steadily eroded state revenue collections.
A Spending Orgy
The truth is that the states spent their way into the current budget crisis. Even the most liberal governors are starting to concede the point. "In the 1980s when money rolled into the state in wheelbarrows there was little incentive to put the champagne bottle down and manage the nickels," confessed Connecticut Gov. Lowell Weicker in his state of the state address this February. "Every year saw more programs and higher benefits with little in terms of control or accountability," he added. This is a remarkable admission from a politician who has rarely met a social welfare program he did not like.
The evidence clearly confirms Weicker's point. From 1982 to 1989 state spending grew by 8.6 percent per year or at twice the rate of inflation. Total state budgets rose from $260 billion in 1980 to $530 billion in 1990. Event the famous Reagan defense buildup pales by comparison.
One area where the states were spendthrifts in particular was in mushrooming government payrolls. While the
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