Even if states balance budgets, services cuts, high taxes, fees likely to stay

For the first time in many years, the state of New York owes me a tax refund — all of $13. But our governor, David Paterson, doesn’t want to give it to me — at least not right away. (And he wants to be re-elected?)

I’m not alone. Paterson wants to hang on to about $500 million in tax refunds due the state’s citizens. It’s an accounting dodge brought on largely by the political failure of the governor and the state Legislature to balance the budget. By law, the state cannot run a budget year in the red. So, rather than face the realities of a $1.4 billion budget deficit, New York’s incompetent, selfish leaders do what they always do — punt, in this case, until next year. That half billion will be rolled out of fiscal 2009 and into fiscal 2010. Out of sight, out of mind. That’s New York’s insanely inept government: Never deal with reality.

Maybe, state officials promise, I’ll see my $13 in April, two and a half months from now. Well, I’d rather be the one collecting the interest on that $13 over that time rather than the state. Sheesh.

Of course, New York’s financial woes aren’t that simple, and it’s not always (but mostly?) Albany’s fault. Recession + people out of work = higher costs + lower tax revenues + increased fees + fewer services. And New York’s not alone. One estimate puts the total fiscal 2010 budget deficit of all states at nearly $150 billion.

Perhaps that’s why the nation’s governors were meeting in Washington, D.C., this past week. That kind of shortens the distance between those who need to beg and those being begged of — like President Obama, host to the annual Governors Ball at the White House, and Congress, the federal equivalent of New York’s moronic Legislature.

We need money, and now — that’s the conversational topic prevailing at the National Governors Association Winter Meeting.

The governors are saying to anyone who will listen, reports Liz Sidoti, the AP’s national political writer, that:

tax collections keep declining as Medicaid costs soar. High unemployment persists. States cut 18,000 jobs in January alone and more job losses are anticipated. Because states are required to balance their budgets, shortfalls will be made up by raising taxes or fees or cutting services.

Like everyone else who’s financially under water (General Motors, Chrysler, financial institutions “too big to fail”), the states are looking to Washington for help to balance their budgets. After all, the states reaped $135 billion in federal stimulus money last year.

Their reasoning: Unemployment stymies economic growth. Seventeen states face double-digit unemployment. The states want up to $25 billion in a jobs creation bill Congress is considering. Creating more jobs would raise tax revenues. That would reduce budget deficits — perhaps even lead to balanced budgets.

Perhaps. But the balanced budgets that states might achieve in coming fiscal years would not necessarily represent full restoration of so many services and programs whacked by fiscal or political necessity in the past two years. States have been under budgetary pressures for years and have repeatedly cut services and pumped up fees for those that remain for their citizens. Newly balanced budgets would likely just represent an under-served, unsatisfactory, pricey status quo. And all those increased fees for almost any state service you can name? They’re not likely to go down, either.

No matter what happens to state budgets, no matter whether the president or Congress extends some billion-dollar largesse to the states, services and costs are not going to return to happier times.

And take note: 37 of those governors frolicking in D.C. this past week (and who’s paying?) face re-election this year.

If Paterson hangs onto my $13, he won’t be getting my vote.

5 replies »

  1. $13? Well, if nothing else, we’ve now quantified how much your vote can be bought for…

    *aherm* Maybe this is a silly question, but which is better for the health of an economy? A trillion dollars for the banks or a trillion dollars to jobs and ed programs?

    Sorry, I know I’m not being helpful. But at least you don’t live in a state that thinks the logical answer to revenue shortfalls is more tax cuts.

  2. It’s likely to get worse. As state and local governments face cost cutting they will eventually have to face government workers. The last sector of the US economy to have strong unions. (In most cases this includes universities; just about every employee on a university campus is union.) There’s also the matter of those wages being good for the local economy, since wages recirculate far more than wage cuts.

    If you’re going to have a service economy, then it’s pretty much necessary that the majority of participants need disposable income.

  3. Jeff: And sometimes, cutting taxes won’t increase government revenue. Therein lies the rub: Under what specific circumstances — or not — is cutting taxes wise policy?

    Thanks for the link.