State legislators have not reached agreement on a final budget for FY 2009-11. One the one had this is quite understandable given the deterioration in the revenue forecast following the April 15th revenue payments and the complications associated with the federal stimulus funds. On the other hand, the result is that the state will have to pass a continuing resolution (CR) that does not include any additional revenues, meaning that programs and services funded through the General Fund (GF) will be seriously impacted. The CR currently under consideration will authorize state agencies to maintain spending equal to 15% less than the authorized budget for 2008-09. Unfortunately “authorizing” them to spend this amount is not the same thing as having that much money to give them to spend! The fact of the matter is that the continuing resolution is $600 million out-of-balance – meaning that to achieve the allowable spending levels under the CR either additional spending cuts or tax increases are required. Allow me to explain.
$19.5 billion: 2008-09 estimated GF year-end spending (including stimulus funds). This is also the same level of spending that is “authorized” under the CR after the federal stimulus funds are included.
minus $18.9 billion: 2009-10 amount of GF tax revenues ($17.5 billion) plus federal stimulus dollars ($1.4 billion) available to support GF services.
equals: $600 million (the amount by which the CR is out-of-balance on an annualized basis).
Not surprisingly, some legislators who would prefer to shrink the size of state government are supporting the CR because it does not contain any tax increases. The problem is that they are claiming that the CR will maintain spending at current levels. WRONG! It will mean an additional cut of $600 million beyond the across-the-board 15% reduction specified in the resolution if it were to remain in place throughout the year. Agencies may be “authorized” to spend 85% of the original 2008-09 budget but that is not the same thing as saying that the state will have the funds necessary to support that spending level. Under the CR, it most certainly will not.
While it’s understandable that disagreements over the tax plans and some spending items have delayed passage of the final budget, it is imperative that the CR be in place for as short a span as possible. The CR enacts deeper reductions than it appears on the surface and it does not allow the state to make certain priorities a reality (closing inefficient prisons, maximizing federal matching funds, etc.).