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Reason Foundation

Banner Year for State Budget Gimmicks

Leonard Gilroy
November 12, 2009, 7:51pm

In the November 2009 issue of Governing, Katherine Barrett and Richard Greene argue that this may be a banner year for state budget gimmicks:
Arizona is hardly alone in looking at "creative" ways to close its budget gap. This year may go down in the record books for the number of gimmicks used to balance state budgets—and the degree to which those gimmicks may come back to haunt the entities involved. We're not particularly aware of any new tricks out there. These are tried-and-true ways for governments to avoid confronting reality—at least for a while. They include deferring payments, accelerating revenues, changing accounting rules and, as in Arizona, borrowing from the future to pay for today.

California, as is often the case, takes the cake. In its efforts to resolve its nearly $60 billion budget imbalance over this year and last year, the state borrowed from local government property taxes and special fund accounts, added to payroll withholding, accelerated personal income tax and corporate tax estimated payments, and will be kicking the June payroll to July. That last one is particularly sneaky. Employees see virtually no difference. Their paychecks arrive a day late, maybe, and that's hardly cause for outrage. But for the state it moves those payments forward a full fiscal year.

"You can argue, ‘What's the big deal?'" says Mac Taylor, California's legislative analyst. "But our concern is that it's an expense we incurred this year, and we really should count it this year. We're getting out of sync on the reporting of what we're spending."
Read the whole thing for more examples of policymakers going to every extreme to avoid making the necessary budget cuts and reforms to address the pandemic of state fiscal crises.

Leonard Gilroy is Director of Government Reform


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