"The budget crises faced by state and local governments are primarily because of the run-up in spending during the economic boom years, which resulted in a dramatic expansion of public employee rolls, salaries, and health and pension benefits."—ALG President Bill Wilson
June 22nd, 2010, Fairfax, VA—States and county, city, and local governments could have an additional $100 billion in federal spending to balance budgets this year under legislation proposed last week by Senators Sherrod Brown, Al Franken and Mark Begich (S. 3500).
The $100 billion would bail out broken state and local government budgets, including $23 billion in education spending for the states, $1.2 billion for police, $500 million for firefighters, and $75 billion for city, town and county municipal employees.
"This is nothing more than a handout to prop up public employees unions who refuse to accept any cuts to spending even though the revenue simply is not there," said Americans for Limited Government (ALG) President Bill Wilson. "While taxpayers are demanding that cuts be made and budgets balanced at the state and local level, the unions are begging Congress to bail them out."
"These 'stimulus' pieces of legislation threaten to change the dynamic of state budgeting. They will permanently remove any balanced budget requirements, in essence creating a new line on the federal budget for the states," Wilson said.
"The states are already beginning to formulate their budgets in coordination with promises from Washington," noting a Washington Times article published today that reported "30 states have adopted budgets that depend on Congress approving at least $24 billion in extended funding for Medicaid."
"If Congress does not act to cut off federal funding, the states will continue to push off the burden of balancing budgets," Wilson explained.
The Brown, Franken, and Begich June 16th proposal followed a June 12th letter from Barack Obama to Congress requesting federal money to prop up state and local governments. Obama blamed the slumping economy that has "left a mounting employment crisis at the state and local level".
Obama wrote that "if additional action is not taken hundreds of thousands of additional jobs could be lost."
Wilson countered, "The only responsible action that should be taken is cutting bloated state and local budgets. The budget crises faced by state and local governments are primarily because of the run-up in spending during the economic boom years, which resulted in a dramatic expansion of public employee rolls, salaries, and health and pension benefits."
Wilson noted that since 2000, Pew Research reports that state pension funds have been underfunded by $500 billion, and overall face a $1 trillion deficit. States also face a $587 billion long-term liability for promised health care benefits, but have only $32 billion on-hand to finance that obligation.
General spending has been rising, too, said Wilson. According to the National Association of State Budget Officers (NASBO), state spending grew from $945.3 billion in 2000 to more than $1.5 trillion 2008, almost a 58.7 percent increased during the 2000's, where revenues were generally rising because of inflated property values.
Wilson again noted that states knew a downturn was coming as early as 2007, but spending still grew by about $100 billion in 2008. "These were huge, unsustainable expansions that need to come back to earth, but Congress wants to keep them in the stratosphere. The public unions desperately want to avoid being cut. They want the same funding levels as the boom years, and that's simply not going to happen."
"So public employee unions' solution is to beg Congress for another $100 billion in handouts. Now is the time for spending restraint, but the only way the necessary cuts will be made is when Congress quits distorting state and local budgeting with annual bailouts," Wilson concluded.
"Driving Right Off the Cliff," by ALG President Bill Wilson, June 16th, 2010.
ALG Letter to Congress Against States Bailout, May 27th, 2010.
"A Bottomless Pit," by ALG President Bill Wilson, February 22nd, 2010.