Ripping the Band-Aid off budget gaps

These gimmicks have pushed state treasuries to the limit. If there is any hope for a fiscally sound future, state officials across the country must be willing to either cut spending or increase taxes to a level that will cover expenditures. State lawmakers should be weary of higher taxes, because all state revenue must come from residents, businesses, and tourist. By raising taxes, state lawmakers encourage people to take their business elsewhere, pushing jobs to other states.

Arizona is suffering from one of the most severe budget gaps in the country of nearly $5 billion. To combat it, the state is undertaking drastic measures to increase revenue and decrease spending. State lawmakers are engaging in cuts that taxpayers will feel immediately, such as closing state parks. An alternative approach would be to sell state parks to private firms to undertake their management—an option that would help to close the budget gap from both sides of the ledger, rather than relying on spending cuts alone. Private ownership would place these treasured places under improved management, keeping them open for enjoyment at no cost to the public.

California has attracted more attention than any other state. As their deficit approaches $40 billion, this is a small wonder. Gov. Schwarzenegger recently faced criticism from the state Legislative Budget Office for promising that expenditures on prisons would never outpace schools. The analysts made a valid point that comparing expenditures across categories is irrelevant. Regardless, the state has taken an important step toward lowering prison expenditures by adopting one of the nation’s most liberal drug policies, choosing not to waste money prosecuting victimless crimes. Every state should take a cue from California in this policy area.

While Schwarzenegger’s rhetoric demonstrates that cutting education spending is always politically unpopular, many states have cut teacher positions in the last year. In Hawaii, legislators instituted 17 furlough days this school year, significantly reducing students’ classroom time. By tackling inefficiencies in administration, lawmakers could help their school systems save tax dollars without impacting the level of service. Hawaii ranks 14th in per pupil spending but 47th in test scores—this disconnect comes from well-documented excessive spending by state’s Department of Education. A private firm would never survive with such disparity between costs and output, but unfortunately for Hawaii’s school children, state bureaucracy does not operate with such efficiency.

Provided that Washington does not continue down the path of using “stimulus” to subsidize poor state budgeting practices, states will be forced to cover their expenditures, including interest on debt, with local revenue. Lawmakers must remember that while no one likes to see public services revoked, each state has room to save money and improve efficiency by looking for government waste in all departments and programs. This will provide constituents with the sustainable services that they deserve without jeopardizing private investment that generates state revenue. State lawmakers can save money, improve efficiency, and solve their budgets’ underlying problems by diagnosing and eliminating waste.

Emily Washington is a master’s fellow in economics at the Mercatus Center at George Mason University.