April 22, 2014; Stateline

It wasn’t all that long ago when the headlines were about state budget deficits cascading into major cuts in social safety net programs, with nonprofits feeling the brunt of trying to meet increasing need with decreasing state government funding. Oh, how times have changed. Stateline’s Elaine Povich reports that 42 state governors recommended higher levels of state spending in fiscal year 2014 with expectations of similarly large or even larger budgets for 2015. The competition is not which programs will be sliced, but where the positive cash flow will be steered—tax cuts or new (or revived) programs, and if into programs, which ones.

Povich cites a recent report from the National Association of State Budget Officials (NASBO) on prospective budget choices for FY2015 in which most states were projecting spending increases of between one and six percent. The choices are difficult for many states:

  • Massachusetts looks like it is in good budgetary shape. The state House of Representatives just released a proposed budget for 2015 that is five percent above 2014’s, though somewhat below what Governor Deval Patrick requested. The biggest increases seem slated for aid to municipalities, new spending for community colleges and other higher ed (enough for a tuition freeze in the UMass system), and new money for substance abuse programs. Youth advocates said, however, that it would severely impact youth jobs and anti-violence programs. Environmentalists said that the budget wouldn’t do enough to protect parks and beaches, and legal aid advocates criticized the budget for its shortcomings in legal services for low-income people.
  • Governor Andrew Cuomo and the state legislature have reached agreement on New York’s 2014-2015 budget, with major property tax relief funding, a plan for cutting the income taxes on manufacturers to zero, increasing school aid by 5.3 percent, and phasing in statewide universal full-day pre-kindergarten. Reflecting the continuing battle between Governor Cuomo and New York City mayor Bill de Blasio, Cuomo added significant support for charter schools in three ways: staged increases over three years in the per charter school pupil funding levels, additional money for charter school facility needs, and making charter schools eligible for the state’s pre-K funding.
  • Illinois Governor Pat Quinn pledged to keep the state’s temporary income tax increase in place despite opposition from Republicans and business groups. Quinn said that if the legislature allows personal and corporate income tax rates to be rolled back, the result would be a $1.9 billion deficit in the state’s operating budget, which would mean cuts in education and public services. The governor did propose a tax credit for property owners on their property taxes, but there was nothing in that proposal for renters who pay property taxes indirectly through their rents.

Not all of the choices by state legislatures are necessarily geared to addressing competing aspects of social spending. In Arizona, for example, the 2015 budget includes $2 million for the state to lure the 2015 National Football League’s Pro Bowl. Glendale, Arizona is already hosting the 2015 Super Bowl, so this would give the state a clean sweep on NFL extravaganzas, even though states typically give up millions in revenues for NFL events, anyhow. (No sales taxes on tickets and parking, and because the NFL is tax exempt, no state and local tax payments.) Povich notes that the budget versions from the Florida House and Senate included $10 million toward constructing the state’s tallest building and funding for moving a lighthouse in the Florida Panhandle.

For all the good budget press, there are some states that still might face tough sledding. Gabe Petek, a managing director of Standard & Poor’s, writes that times have been good for many states—36 ended their FY2014 budgets with balances equal to or greater than what was originally anticipated at the beginning of the fiscal year. But 26 states ended with reserves equal or lower to what they had in 2008. S&P sees trouble with the state budgets of Pennsylvania, Illinois, New Jersey, New Hampshire, and Kentucky. That doesn’t include what might be a lurking problem of state budgets, the number of states that have significant unfunded pension liabilities.

No one should be fooled that the serial cuts that gashed state human services programs during the recession will automatically be reversed as a result of current surpluses. There are lurking financial problems in some states and competing interests in others. The safety net won’t get reknit simply because the money is there to do it.—Rick Cohen