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Legislatively Speaking
The solution is the problem

By Gordon Gibson, State Legislative Director

  JANUARY 2010 --

The State's financial situation is not good. Everyone agrees on that, but they cannot agree on what to do about it. The problem is that there are not a lot of choices left. The State depends heavily on the income tax and the sales tax. When businesses and individuals have less income, they pay less income tax. Because they have less money, they cut back on spending which cuts back on the sales tax they pay. The General Assembly passed a budget in September which Governor Rell allowed to become law without her signature. That budget, like all budgets, had to make some assumptions about the amount of money the State would collect in taxes.

Now, because of the economy, the tax revenues are not as much as predicted. The Governor and the leaders in the General Assembly agree that something should be done to correct the problem now before it gets any worse, but they do not agree on what that "something" is.

Governor Rell called the General Assembly in to a special session and sent them her recommendations on where cuts should be made in the budget. The Appropriations Committee held a public hearing on December 8 to hear what the public had to say about the problem. Although the weather was very bad that morning, over 300 people showed up to testify. The Appropriations Committee divided itself in half so they could hear speakers simultaneously in two rooms, but some people still had to wait until after 8:00 that evening for their turn to speak for three minutes. Many others, including me, submitted written testimony but did not attempt to speak that day.

All the testimony, including mine, can be summarized very briefly in one sentence: Don't take any money away from my group's favorite programs or projects and don't raise taxes. Complying with the Governor's call, the General Assembly convened on December 15, but the only thing they did was vote to adjourn. The leaders in the General Assembly, being from the other side of the political aisle, were not going to accept the Governor's recommendations, but were not yet ready to submit their own recommendations. They have said they will call another special session, probably in January, when they have a proposal they want to pass ready for a vote.

The General Assembly could have voted to recess until the leaders' proposal was ready for action, so I do not know why they voted to adjourn the December 15 special session. The State's finances are similar to a family's finances. The only way they can spend money they do not have is to borrow the money, then pay it back with interest. The family does this using their credit cards. The State does it by selling bonds in the financial market. Just as a family decides they are not going to put any more charges on their credit cards, the State can decide it is not going to sell any more bonds. For both the family and the State, this means they must either increase their income to meet their expenses or reduce their expenses to stay within their income.

In the reality of today's economy, increasing the income is not always an option for either the family or the State. The question then becomes where and how much to cut spending. The family decides what their priorities are and reluctantly cuts spending on their lowest priorities. The State tries to do the same thing, but the problem is that different legislators and different constituents have different priorities. The big question now is what will happen next.

The General Assembly will most likely call itself back into another special session in January and pass some changes to the budget, but no one can say how Governor "Rell" will react until she has something to react to. She could approve and sign whatever the General Assembly passes, she could veto it and send it back to the General Assembly or she could let it become law again without her signature, just as she did in September. I am not going to predict what the General Assembly will pass in January or how the governor will react to it.

What I will predict is that when the General Assembly convenes for their 2010 regular session in February there will still be problems with the budget and a good amount of time will be spent next spring trying to resolve those problems. Somehow even my prediction sounds like many families budgets.


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