It is unclear whether some candidates running for the Legislature are playing dumb about the state’s budget problems or whether they really are clueless. Either way, it’s not encouraging.
In interviews with The Eagle editorial board, many legislative candidates – all Republican – have seemed perplexed by questions about projected state budget shortfalls. Most dismissed the projections as potentially inaccurate – even though the state budget is based on these estimates. If they conceded that there might be revenue shortfalls, many downplayed the severity, suggesting that the state could balance its budget simply by eliminating wasteful spending.
If only it were that easy.
A new report is expected this week on state tax collections for July, the first month of the new fiscal year. Even if the collections come in on target or greater than the revenue estimates – unlike the past three months, when revenue was $338 million less than expected – the state still faces a major budget shortfall.
That’s because the state is budgeted to spend about $320 million more than it expects to collect in revenue this fiscal year. As a result, it will burn through most of its cash reserves this fiscal year. Then the big problems start.
The 2016 fiscal year’s budget (which lawmakers will draft next legislative session) will need more revenue or sharp spending cuts just to get to zero. And that doesn’t count restoring the cash reserves to the statutorily required level of about $500 million.
Added to this challenge is the fact that the state’s pension and Medicaid costs will continue to increase. Also, the courts could rule again that the state is inadequately funding public education – possibly ordering a funding increase of several hundred million dollars. And the state can’t keep raiding its transportation fund, which is how it’s been balancing its budget lately.
Also, state income tax rates fell again this past Jan. 1 and are scheduled to drop again next Jan. 1.
Still, maybe the state’s economy will take off and tax revenues will soar, surpassing the estimates and eliminating the budget shortfalls. Maybe, but it is more likely that tax collections this year will be less than the estimates, making the budget problems even worse.
“Is it realistic to believe that income tax collections would fall $713 million one year and then rise back up $301 million the next, especially when additional tax rate reductions are kicking in at the same time?” asked former state budget director Duane Goossen. “Of course not.”
For now, legislative candidates prefer a rosy fantasy to the state’s looming budget reality.