Wednesday, March 18, 2009

Looking ahead to January 2010: Hope is now a plan

As state leaders have addressed the budget situation, GOP legislators have repeatedly referred to the budget crisis as an opportunity, a chance to "right-size" state government.

But very few layoffs have been proposed, with the governor and legislators saying they prefer to allow state departments to decide how best to cut their budgets. In many cases, those departments have chosen employee furloughs.

Furloughs are a temporary fix, not a way to "right-size" government.

The fiscal 2010 and amended 2009 budget are also balanced by taking hundreds of millions from various state reserve funds, particularly the state's rainy day fund and health benefit plan reserves. Those reserves and the federal stimulus, which contributes $1.4 billion to the 2010 budget, allowed the state to balance its budget without a major tax increase or massive spending cuts.

And I mean "massive" in a way that would make the cuts already contemplated in the '09 and '10 budgets look like fun.

But the thing about reserves is that you can only raid each dollar once, and we're taking them down pretty low, compared to an $18.6 billion annual budget.

So what happens next January, when legislators show up in Atlanta to work on the amended 2010 and fiscal 2011 budgets? Basically, one of two things.

Either the economy will have improved, and the hardest questions won't have to be asked. Or legislators will have to contemplate massive spending cuts and/or tax increases in an election year.

I changed my characterization of the reserves from "pretty close to zero" to "pretty low." I should be able to get hard numbers tomorrow, and they won't be zero. The point is, you have to have something in reserve. And I believe most experts agree we'll be getting down to the bare minimums with the way we're using the state's reserves.

UPDATE 2: And then there's this: Governor warns of Medicaid hole.

UPDATE 3: Speaker of the House Glenn Richardson is not particularly hopeful. This is what he told state legislators early Thursday afternoon:
"I'm afraid this won't be our last visit to this building this calender year," he said. "I'm afraid this economy is dragging down faster than we can even calculate. I'm afraid it's coming apart at the seams. ... You better start thinking about drastic actions. ... The cuts you see today are the tip of the iceberg."


Nick said...

So what do you want them to fire all of us? Some state employees are actually needed you know.

Lucid Idiocy said...

I'm not saying what needs to be done. I'm saying furloughs are not "right-sizing." They're a temporary fix.

And I'm telling you: The state has a severe revenue problem. Unemployment is at an all time high.

Unless there is a pretty amazing turnaround in the economy, the cuts you've seen so far are nothing to what's coming.

Nick said...

If my hunch is right, the furloughs will just turn in to paycuts and that will be a permanent revenue saving measure. But, what we need to do is give the other part of the stimulus time to work. We should see some relief in the next couple of quarters.