In the aftermath of the global recession, Gov. Bobby Jindal and state lawmakers have cobbled together an increasingly tenuous series of expedients to balance the state budget. Large budget cuts to health care and higher education have been the order of the day, along with the use of one-time money to keep the state budget in the black. Policymakers are hoping for brighter days ahead for the state budget as the global economy gradually rebounds.
But a national panel studying challenges for state budgets across the country has concluded that states will continue to face daunting fiscal challenges, even if the economy improves. In addressing those challenges, state leaders are going to need more than accounting gimmicks and a budget knife to keep state finances solvent.
Those are the main lessons from a report issued by the nonpartisan State Budget Crisis Task Force, which included a number of nationally noted fiscal experts, including Paul Volcker, a former chairman of the Federal Reserve.
The panel examined state budgets in six large states, but the findings throw light on problems shared by many state governments nationwide. The panel’s report focused in California, Illinois, New Jersey, New York, Texas and Virginia. Many of the themes explored in the report will be familiar to those who have followed state budget policies here in Louisiana.
Many states, including Louisiana, face multimillion-dollar headaches in financing Medicaid, a government program that funds medical services for the poor. Louisiana is also among many states with large unfunded liabilities for state retirees. Louisiana and many other states face problems in funding maintenance and improvement of state roads and bridges because gasoline tax revenues have not kept up with infrastructure needs.
We commend Jindal for proposing changes in the state retirement system that, while not perfect, did advance a useful discussion about the problem posed by the state’s large financial liability to state retirees. Thinking beyond the next election cycle, unfortunately, has been the exception rather than the rule at the State Capitol. The state’s budget problems, while exacerbated by the recession, are due in large part to structural challenges and tax policies that existed before the economic downturn. Those problems will persist after the national economy improves.
So far, most of the proposed solutions we’ve seen among state leaders are Band-aids, not cures.