Putting the "Laboratory of the States" to Work in Illinois
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"The way to get good ideas is to get lots of ideas, and throw the bad ones away." So said Linus Pauling, the two-time Nobel Prize winner for chemistry. A lot of ideas have been suggested to solve Illinois's budget shortfall, and it's time to separate the good from the bad. According to the National Association of State Budget Officers, Illinois is one of 37 states that will face a budget gap in 2010. Illinois lawmakers should turn to the "laboratory of the states" to see how other states are addressing their budget shortfalls without pushing tax hikes on families and businesses when they can least afford them.
Presented here are examples of state leaders working to close their budget gaps without job-killing tax increases.
Texas Governor Rick Perry (R) was facing a $5 billion deficit that needed to be addressed in the fiscal year 2010 budget. Fortunately, past spending restraint allowed Texas to draw upon a generous rainy day fund. Still, Governor Perry and the legislature are making cuts and controlling spending to minimize the amount of money needed from the rainy day fund. In an attempt to keep future budgets from soaring, an expansion of state-run health care was deflected, as was an expansion of unemployment benefits. The governor and the legislature also increased the exemption on gross margins taxes on small businesses to $1 million for the next two years and $600,000 permanently. This will save many small businesses in Texas thousands of dollars a year.
During his time in office, Governor Mitch Daniels (R) has overseen budgets with low growth rates, allowing Indiana to better weather the rough economic climate. Still, Indiana had faced a budget gap of $1.5 billion for 2010, but Governor Daniels and the legislature were able to close it without raising taxes; instead, his budget proposal outlined responsible spending cuts. Total state spending was reduced by 2.5 percent, the only exception being public education. Governor Daniels has put a restriction on new hiring and has instituted a salary freeze.
Georgia Governor Sonny Purdue (R) is attempting to close a $2.8 billion shortfall in the 2010 Georgia state budget. To close the gap, Governor Purdue has enacted furloughs for 25,000 state employees and he is cutting $1 million from the Superior Courts' budget. In addition, lawmakers cut $10 million from the state parks budget. Most significantly, Governor Purdue has ordered a twenty-five percent reduction in June spending for all state agencies, and a further three percent cut in July spending. Georgia State Senator Eric Johnson has said that another $1 billion dollars will need to be cut but Georgia will not raise taxes.
Minnesota faces a $2.7 billion shortfall for fiscal year 2010.12 Governor Tim Pawlenty (R) has stated that tax increases are unlikely to fix the shortfall, and he has vetoed a host of tax increases passed by the legislature. Governor Pawlenty used his "unallotment" power to close the shortfall. The reductions in spending that he is proposing include $300 million in reductions to cities and counties, a $236 million reduction in human services spending, $1.77 billion in K-12 education deferrals and adjustments, and a $100 million reduction in higher education appropriations.
Missouri's budget gap is estimated at $370 million. Governor Jay Nixon (D) is cutting 1,329 state jobs, mostly by not filling open positions, and 200 more will have to be cut according to Missouri's budget director.Governor Nixon has said that he is going to cut an additional $100 million from the budget that was passed by the legislature.
The Bayou State faces a budget shortfall of $2 billion for their 2010 budget. Despite tax increase proposals from some legislators, Governor Bobby Jindal (R) and allies in the Louisiana legislature defeated them. In fact, Governor Jindal extended tax credits to many industries. He undertook cost-cutting measures such as eliminating 1,400 state government jobs and cutting $13 million from the Department of Tourism. The House cut 3,400 state government jobs and eliminated pay raises to state employees. Governor Jindal is also modestly cutting funding to K-12 education and higher education.
To address Alabama's budget shortfall, Governor Bob Riley (R) has announced a series of spending reform measures, which include a hiring freeze, a ban on state employee raises and new government vehicle purchases. Governor Riley also moderately reduced education spending and directed all state agencies to find ways to reduce expenditures. The Alabama Personnel Board has allowed all state agencies to furlough state employees for up to 24 days a year to reduce costs. Governor Riley understands the effect of tax increases in a difficult economy, saying in his State of the State Address, "higher taxes would only make a tough situation even more difficult for the people of Alabama. We are here to ease their burdens - not add to them."
Governor Brad Henry (D) and the legislature have worked out a budget to address an estimated $310 million shortfall. The budget reductions include up to 7 percent for most state agencies. He has proposed efficiency reforms, such as improving the state's purchasing system and consolidating computer operations. In addition, Governor Henry has opposed any raises for public employees and has slashed travel for everyone but public safety agencies.
Addressing Illinois's overspending problem is certainly a challenge, but it's one that can be solved without resorting to raising taxes on businesses and families in the midst of a recession. The "laboratory of the states" shows that other states are balancing their budgets with targeted spending reforms.
Illinois lawmakers should look to these other states for inspiration as they search for the right formula to solve our budget problem. Luckily for us, Illinois doesn't need a Nobel laureate to fix the budget, just some common sense.
Jordan Harp is a Milton Friedman Intern at the Illinois Policy Institute, a nonpartisan research organization dedicated to supporting free market principles and liberty-based public policy initiatives
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