The Governor needs to find at least $750 million in savings to bridge the budget gap in this fiscal year. The Pioneer plan urges that he and legislative leaders start with emergency and targeted cuts that will save $311 million in the final half of FY09. These common sense reforms will return the state workforce to 2004 levels, end corporate welfare, and consolidate overlapping state functions. Combined with a $300 million withdrawal from the rainy day fund and a measured 4 percent cut in local aid ($200 million), the Governor could avoid further cuts to the safety net and core services.
Importantly, Pioneer’s budget recommendations are premised on avoiding blind, across-the-board cuts and on embracing a more principled approach based on four tenets.
1) Don’t raise taxes or close so-called “loopholes” during a deep recession. We face a lethal combination of a monumental financial meltdown, irresponsible budgeting and a persistent structural budget gap. We need to address these factors.
2) Refocus government on core services, such as care for the vulnerable, safety (public, environmental, infrastructure), and education. Preserving the safety net should be a priority in times of economic turbulence. We should ensure that we can continue to fund these services in the future by looking for reforms that reduce their cost.
3) Don’t sacrifice reforms that can have long-term impact. Reforms like the 2006 Health Care law have their shortcomings, but rather than ending them, we should seek to correct them to ensure long-term sustainability.
4) Avoid fiscal shell games and one-time gimmicks. In October, the Governor shifted the current budget burden to future generations when he extended the schedule for paying off unfunded pension liability. He was also too quick to draw down the rainy day fund. With $600 million already drawn from the fund this year and next year’s budget promising to be equally difficult, we should be parsimonious in our use of the remaining $1.7 billion.
Pioneer’s plan avoids fiscal shell games. The Institute recommends limiting withdrawals from the rainy day fund to no more than $300 million and avoiding any further extensions in the public pension payment schedule.
The Institute also recommends that the state not pass the fruits of its own unwillingness to reform on to local officials. The Pioneer recommendation for a $200 million cut in local aid is difficult as it is. We balance it with a call to implement reforms that overall would save localities up to $250 million. These actions include consolidating locally managed pension funds into the state system, giving municipal executives the right to bring public employees into the state health insurance pool, and eliminating mandates such as prevailing wage requirements.
Pioneer’s full budget policy brief can be found at Pioneer’s website.
Director of Communications