- The Washington Times - Tuesday, April 12, 2011

ANALYSIS/OPINION:

The federal government is far from alone in its financial woes. The profligate attitude of a congressman is found just as often in governors, state legislators, mayors and city councilmen all across the nation - and it shows. While a few jurisdictions are slightly better at managing their money than others, the overall picture painted last week by the Government Accountability Office (GAO) is grim. The watchdog agency reported on its economic simulation that predicts state and local governments will face deficits deepening year after year for the next half-century, with no relief in sight - unless they radically alter course.

It’s not hard to see the cause of this problem. In the not-so-distant past, times were good, and the tax revenues flowed. In a season of plenty, politicians couldn’t resist the urge to embark on new spending projects instead of saving for a rainy day or returning surplus funds to taxpayers. The resultant spending spike became insupportable when the economy collapsed. The combination of high unemployment and lack of economic growth was reflected in a 16 percent drop in personal income tax receipts at the state and local level between 2008 and 2009. Taxpayers simply couldn’t afford to buy as much, and sales-tax revenue dipped 5 percent. Last year’s “recovery” saw a 1.45 percent increase in income-tax receipts and 1.95 percent in sales taxes, but overall receipts remain below 2008 levels.

It’s a dire situation that GAO accountants summarize in characteristically understated terms: “Since most state and local governments are required to balance their operating budgets, the declining fiscal conditions shown in our simulations suggest that these governments would need to make substantial policy changes to avoid growing fiscal imbalances.” GAO suggested a 12.5 percent reduction in spending needs to be put in place immediately and maintained for the foreseeable future.

That’s hard to do because taking away spending authority from a politician is like taking candy from a baby; politicians, in fact, distribute other people’s money as if it were candy. Their live-for-today philosophy is most evident in the escalating cost of public-sector union retirement packages. The value of state and local pension-plan assets cratered with the stock market and remain below 2007 levels. Currently, state and local employees contribute 9.8 percent to their benefits, on average. GAO estimates that properly funding these accounts would require an 11.8 percent contribution rate. Asking public employees to carry a bit more of their fair share of the burden is the sort of thing that triggers Big Labor sit-ins at the state capital.

Politicians caving to such pressure created one of the greatest fiscal burdens on state and local treasuries: health care retirement benefits. Lawmakers approve lavish increases in such goodies in exchange for political support, knowing the bills won’t come due for many years. By GAO’s calculations, public-sector health costs will grow to consume 8.3 percent of gross domestic product in 2060.

Ultimately, the responsibility for these fiscal woes falls on voters who continue to send big spenders to city hall and the statehouse. Politicians will focus on pork as long as it works. That’s why the Tea Party needs to work just as hard to change attitudes at the local level so sanity can be restored at all levels of government.

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