At a time when Washington continues to struggle to trim deficits that approach $1.5 trillion annually, Republican-led states, along with a few Democratic officials, continue to take the tough steps necessary to balance their state
budgets without tax increases. Here are a few of those states and the policies they have put in place to achieve these impressive results:
In Virginia, Gov. Robert F. McDonnell stood firm against tax increases last year and balanced his state’s two-year budget. Virginia taxpayers were rewarded when Mr. McDonnell recently announced a surplus of $311 million for the fiscal year just completed because of higher-than-expected tax receipts. It’s questionable whether the surplus would have materialized had he raised taxes last year, as many were demanding.
In Louisiana, Gov. Bobby Jindal and the first Republican legislative majority since Reconstruction passed a $25 billion budget that closed a $1.5 billion hole without tax increases. Mr. Jindal also realized his goal of not reducing funds for kindergarten through 12th grade and higher education, though those programs would absorb inflationary costs. The budget establishes Coordinated Care Networks, which outsource to the private sector the job of matching Medicaid beneficiaries with physicians and other providers. Most impressively, for the first time, the Louisiana budget contains no “member amendments” - otherwise known as earmarks - for projects in districts of powerful members.
Missouri’s Republican-dominated legislature adopted a 2012 state spending plan of $23.2 billion - $500 million lower than last year. This figure includes an additional $170 million of cuts implemented by Democratic Gov. Jay Nixon, making Missouri an example of bipartisan cooperation in spending restraint. Such cooperation is enhanced by Missouri’s requirement, similar to the law in many states, that the governor submit a balanced budget and that no deficit be carried over to the next fiscal year.
At least two states saw no such bipartisan cooperation, yet in both cases, small-government forces triumphed. In North Carolina, the first Republican legislative majority since the 19th century enacted a balanced-budget plan that closed a $2.5 billion deficit (12 percent of the total budget) and allowed “temporary” sales and income tax increases enacted by the Democratic majority in 2009 to expire. Led by House Speaker Thom Tillis and Senate President Pro Tempore Phil Berger, Republicans cut spending about 4 percent in total, which was possible because state spending had doubled in the previous decade. Education spending reductions were paired with programs to strengthen classrooms and teaching. Classroom sizes were reduced, and a performance pay model for teachers and other state employees was established. The cap on charter schools in the state was eliminated. The budget also included substantial Medicaid savings by consolidating programs and creating greater efficiencies.
Liberal Democratic Gov. Bev Perdue vetoed the budget, which was overridden promptly in both houses, with all Republicans and a few courageous Democrats voting to override.
In Minnesota, the Republican majority faced off against the very liberal Gov. Mark Dayton. Mr. Dayton, of course, proposed to increase taxes on the “wealthy.” The Legislature stood firm against any tax increases, resulting in a shutdown of state government for nearly three weeks. The final agreement closed a $5 billion deficit without raising taxes, and at least one tax, a 2 percent provider tax added to every patient bill in Minnesota, was phased out.
The Minnesota budget creates a Sunset Advisory Commission to review state agencies and programs, with the aim of enhancing program efficiencies. The budget also contains significant structural reforms that can substantially moderate state spending in the out years. On kindergarten-through-12th-grade education, state allocations to school districts will be based at least in part on student performance. Teacher evaluations were strengthened, and local school districts will not be penalized for not signing new agreements with their teachers unions at the beginning of the year.
In health care, the MinnesotaCare program was redesigned to provide vouchers to participants to purchase health insurance on the private market, a plan remarkably similar to Paul Ryan’s Medicare reform plan. The number of participants in the program is small, but over time, the results should tell us much about how enhanced consumer choice can improve health care affordability and quality.
The downsizing and rationalization of government continues at the state level because Republicans in charge - and some Democrats - are seizing the moment and putting forth real and constructive ideas on how government can be made less costly and more efficient. It’s a mindset more prevalent at the state level because constitutional and statutory provisions require legislators and governors at least to think about alternative strategies to balance their budgets. Compare that with a federal budget process and Washington culture that looks for every new and creative way to spend taxpayer dollars without any consideration of ultimate costs.
The irony is that it is Washington that is constantly telling the states how to handle their business affairs. Based on this year’s results, the states have much to teach Washington.
Frank Donatelli is chairman of GOPAC.