Increasing Number of States Facing Budget Woes a Troubling Sign for America

Nearly all of the 50 states have been busy wrapping up their operating budgets. But in the process, far too many had to twist, turn and pull themselves out of shortfalls with budgeting gimmicks.

In fact, according to Standard & Poors and the Rockefeller Institute of Government, a full majority of the states were forced to pull a fiscal rabbit out of the hat in order to balance their budgets -- draining their reserves, shifting funds around and raising taxes to address the shortfalls. In addition, a recent report from the Volcker Alliance led by former Federal Reserve Chairman Paul Volcker brought attention to these kinds of questionable budget actions and called for more truth and integrity in state budgeting. He found that many states "resort to short-term budget sleight of hand to make it appear that spending does not exceed revenue" and called out techniques like shifting timing of receipts and expenditures across fiscal years and using one-time revenue sources to cover recurring costs.

To see the benefits of fiscal stability to a state's success, one need look no farther than a state like Ohio, where its state budget today stands as one of nation's strongest. It's been quite a turnaround, to say the least. Just four years ago Ohio climbed out of an $8 billion budget hole and refilled a rainy-day savings account to $2 billion that had been down to just 89 cents -- all while cutting taxes at the same time.

The result has been upgraded credit outlooks from the national rating agencies, a strong signal to job creators that Ohio is a safe and welcoming place to do business. And it has triggered a burst of economic growth that helped Ohio recover hundreds of thousands of jobs. It's that very message that helped lure Amazon to make a major, job-creating investments in Ohio earlier this spring.

Compared to so many other states' challenges, this might sound too good to be true. But, it isn't the bit surprising for those of us who served with John Kasich while he was in Congress. John led the House Budget Committee that helped orchestrate the first balanced budget since man walked on the moon. Today, as governor of Ohio, John has applied the same principles that helped he and his congressional colleagues work toward the nation's first balanced budget since 1969. The Kasich approach -- then and now -- is straightforward:

  • Create an Honest Budget: Gimmicks and accounting shifts will always catch up with you.
  • Estimate Conservatively: Politicians who stretch their revenue estimates or low-ball expenditures for short-term political gain put their states at risk.
  • Restrain Spending: When politicians let needless pork and earmarks get through, it only takes away from true budget priorities.
  • Encourage Economic Growth: John Kasich has said it best: "Economic growth isn't an end in itself. It's a means to an end and it provides us with the resources to lift people up." Stable budgets show job creators it's safe to invest and grow.

While Ohio has been a leader in fiscal stewardship under Kasich's time as governor, there are some other states that are also having success using smart budgeting principles to improve their state budgets and the lives of their citizens. Our federal government could learn from them as the current leadership in Washington continues to ignore the principles of responsible budgeting and allows our national debt to climb toward $19 trillion.

#####

Timothy Penny (D) represented Minnesota's First Congressional District in the U.S. House of Representatives from 1982-1994. Throughout his congressional career, Penny placed an emphasis on budget issues. He chaired the Democratic Budget Group as well as the Porkbusters Coalition.