Tension is rising in the state budget process as financial realities force very uncomfortable choices.
Perhaps the main things to underline at this stage are: (a) nothing at all is settled yet about the budget, reform or revenue; (b) all the major players endorse the principle of reform before revenue and are trying to do the right thing.
Last week the House had to vote on its budget. Uncertainty about state budget decisions extends uncertainty for a host of local decisions, not to mention state agency decisions.
Any delay in the vote would have made it likely that we would not have a budget in place by July 1. After the House debates and votes a budget, the Senate has to debate and vote a budget, the two versions have to be conferenced between the branches, the two branches have to accept the results of conference, the Governor has to sign or veto the budget and finally, the House and Senate have to choose which, if any, of the Governor’s vetos to override. This process always takes several months.
Additionally, the House needed to take a revenue vote of some form to put the issue of revenue in play for the conference committee — only the House can initiate a revenue bill under the constitution. The sales tax vote that we took may or may not be the last word on revenue in this session, but, if revenues were to be a potential part of the solution, that vote had to be taken last week.
Many of us, including me, would have preferred, in theory, to delay a revenue vote until our major reform initiatives had become law. We have all made a commitment to reform before revenue, and while ethics reform, pension reform and transportation reform have all been voted in the House, they are still working their way through the legislative pipline. These bills are moving fast for bills of their broad scope, complexity and controversial nature. Usually, the legislature handles only one or two bills of similar difficulty in a two year session. It is likely that all of these bills will be on the Governor’s desk around the same time that the budget arrives there, but until they do, we will all be uncomfortable.
The other problem with moving forward in April was that April is a bell-wether month for revenue forecasts. We have all been aware of the continued drop in state revenues, but there has been no official revision of revenue estimates for Fiscal 2010. Based on the dismal final April results, it is likely that the revenue estimates will be revised downward by over $1 billion (roughly 4% of the state budget).
So, the budget that the House has just debated and passed will likely be substantially revised in conference committee. The House-Senate conferees always have a big job, but this year, they will have extraordinary responsibility to make large decisions about both spending and revenue.
The House, in the uncomfortable but necessary position of moving forward with major related issues unsettled, debated and passed a thoughtful budget that (a) makes a good local aid allocation; (b) reforms our handling of capital gains revenue to better protect against future rainy days; (c) includes deep cuts in programs and public employee compensation elements; (d) is a compassionate document that attempts protect the most vulnerable; (e) makes no draw on reserve funds.
While the final product will end up looking rather different, the House budget makes an important statement about priorities which will influence the choices that the budget conferees make.
For now, those concerned about reform, revenue and the budget will need to continue to watch and wait over the coming weeks as the action passes from the House to the Senate and the conference committees.