Not a single state lives under a balanced budget requirement as
onerous as the one currently being debated by Congress. Not a
single state could. And the states shouldn't support this
requirement either. Why?
Your state probably doesn't include all state
spending in its balanced budget requirement.
Chances are, the
state maintains a separate capital budget that allows it to sell
bonds worth millions of dollars to finance important building
projects that help the state invest in its future. The federal
government doesn't have a separate capital budget. That
means capital improvements have to be paid for by this year's
revenues. States don't live with this requirement because it's
foolish. Why should the federal government live with it?
If it's like most states, your state's balanced
budget requirement probably requires the Governor to submit
a balanced budget, or the legislature to pass a balanced budget.
But if the economy takes a turn for the worse in the middle of
the year, there is no provision for making draconian cuts to
restore balance. That wouldn't make fiscal sense. The federal
requirement would force just such cuts.
Chances are, the Federal government bailed
your state out of the last recession, which it could do because it
has the ability and the need to help the economy recover from
recessions. Between 1990 and 1992, states increased their own
spending by 15%, but they leveraged federal funds to the hilt,
and federal spending by the states went up a whopping 37%
over just two years. With a balanced budget amendment,
states wouldn#t be able to rely on Uncle Sam to bail them out of
recessions. Instead, they'd have to make drastic cuts in
programs or raise state and local taxes. Either way, the
recession would get worse.
If a balanced budget amendment is passed,
your state will be affected immediately and severely. Most
people don't realize that the federal government pays for a lot
of the programs states provide. In fact, 28% of state operating
budgets are financed by the federal government. If the federal
budget must be balanced at all times, programs for state and
local governments will be the easiest and fastest to cut.
Who will pay for natural disasters? If floods,
tornadoes, hurricanes, blizzards, or droughts strike, the federal
government usually pays for the lion's share of the repairs
through the Federal Emergency Management Administration
(FEMA). With a balanced budget requirement, could you count
on a 3/5ths majority of Congress to support a deficit just to help
out one or two states? Don't count on it.