Budget balanced at expense of reserves

By the Journal Editorial Board | Thursday, December 04, 2008

Previous Page

Share

• del.icio.us
• Digg
• NewsVine
• Fark

Print

Email

Gov. Mike Rounds seems to be hoping for a bright future that’s only 18 months down the road.

Tuesday, in his annual meticulously detailed budget address to the State Legislature, Rounds indicated he would recommend spending $60 million of the state’s property tax reduction fund to balance the state budget for the remainder of the current fiscal year budget and that of fiscal year 2010.

That move would all but drain the property tax reduction fund by 2010, the year he leaves office.

“We can’t do this forever (take money from reserves) but nonetheless we have an obligation to take care of … basic needs of this state,” he told the Legislature Tuesday.

Our question is this: Why use an emergency measure of draining the property tax reduction fund to combat revenue decreases in the first year what could be a multi-year economic slowdown?

The governor is right, we can’t do this forever -- but we’d suggest doing it for the fiscal year 2010 budget is too soon.

These are unprecedented times for many individuals and certainly for those in leadership roles in government. We say “unprecedented”   because state governments have had the luxury of working with revenue provided by thriving taxpayers. Since Rounds took office in 2003, state spending has increased $165 million for social/public programs, $130  million for education, $49 million for law enforcement and courts and  $17 million for all other government. Those increases were the state’s good old days. As taxpayers tighten their belts, the state is forced to follow suit.

But is dipping into reserves really following suit or just getting by, hoping for an economic rebound by 2010? Possibly the latter.

Belt tightening would require a fundamental change in thinking, something most states are only now forced to even consider. No longer can the states grow budgets and programs nor maintain them at the current   levels and continue to balance budgets. But relying heavily on the state reserves to balance a budget, however, staves off that inevitable reality.

Pulling from reserves is certainly more popular than laying off people or cutting programs. But this economic downturn won’t be a one- or two-year event. Starting now, planning should be taking for the long-term health of the state during difficult economic times. Using reserves is simply a short-term solution to a long-term problem.

The state will get through the 2010 budget on the backs of the reserves but real budget issues will face the next legislature and the one after that. Those legislatures will be forced to make difficult decisions about cutting state programs and jobs to balance the budget.

We suggest the state hold onto the its reserves, or a good portion of them, and seriously consider it may be time to find positive ways to begin  trimming the fat now rather than   be forced to make unpopular, painful decisions later without any reserves for backup.