Long-Term Budget Reality Requires Bold Innovation

worth a read...

 

GPPF:

With state revenues finally ending their freefall and a balanced budget working its way through the House, it's reasonable to expect the job will be easier next year. Georgia’s fiscal year 2011 budget is balanced. Unfortunately, it's with nearly $2 billion of federal stimulus funds. That's money that will not be available next year. And Georgia may have missed several golden opportunities to avoid a repeat of this year’s budget drama.

 

Unlike most recessions that are followed by a rapid recovery, many experts believe the economy – and state revenues – will recover much more slowly this time around. With the burden of massive new health care spending and significant federal tax increases on the horizon, it's hard to disagree.

 

In previous recessions, state government could use rainy day funds and other short-term fixes to bridge the gap before revenue growth returned. This recession was different. Not only did revenue growth decline, revenues dropped below the previous year’s revenues, which has happened in Georgia only a handful of times in its history. Not only did revenues drop, they dropped to 2005 levels – one of the largest declines in the nation.

 

So what does this mean? A long-term decline in revenues means temporary measures like furloughs and one-time funds simply shift the crisis forward to the next year. Across-the-board spending cuts need to be replaced with strategic thinking. Balancing this year’s budget solves little unless Georgia begins the process of fundamentally restructuring state government to be more efficient.

Posted via email from Jim Nichols