LATE STATE BUDGETS

By Erica MacKellar | Vol . 25, No. 22 / June 2017

NCSL News

Did you know?

  • States with no session limits are more likely to have late state budgets.

  • New York once went 20 years without passing a budget on time.

  • Since 2002, at least 25 states have started a new fiscal year without a budget in place.

Passing a state spending plan is the legislature’s single most important job. However, crafting a budget is no easy task. Legislators are constrained by revenue estimates, the economy, politics and time. The new fiscal year begins on July 1 each year in all but four states, and most legislatures meet for only a few months each year. The Utah Legislature, for example, has only a 45-day session to complete the state’s budget.

What happens when a state does not agree on a budget before the start of a new fiscal year? The answer depends greatly on the state. In the most extreme cases, failure to pass a budget leads to a government shutdown. The government will shut down without a budget in 22 states. However, in many of these states, the legislature has never failed to pass a budget and a shutdown has never occurred. By and large, states meet their budget deadlines and state government shutdowns remain rare.

State government shutdowns were more common during the Great Recession, when falling state revenues presented difficult budget choices for lawmakers. One of the most disruptive shutdowns during this period occurred in Minnesota in 2011. The 20-day shutdown temporarily laid off 19,000 state employees and closed state parks over the busy summer travel season.

Until recently, Rhode Island was the only state to fail to pass a budget for an entire year. In 1924, the Rhode Island House passed a state budget, but there is no record of the budget passing the Senate. In April of 1925, the legislature passed a bill to cover unpaid bills from the previous fiscal year.

In the more modern era of state budgets, Kentucky held the record for the latest enacted budget in March 2003—nine months into the new fiscal year—until Pennsylvania and Illinois experienced significant budget challenges in 2015. Those states failed to pass budgets when their legislatures and governors could not reach agreements. Pennsylvania’s governor let an FY 2016 budget become law without his signature in March 2016, tying Kentucky’s nine-month budget stalemate.

Illinois currently holds the record for the longest a state has gone without an enacted budget. The state never enacted a budget for FY 2016 or FY 2017. Court orders and stop-gap funding measures have kept the government functioning, but the state now owes billions of dollars in backlogged payments.

In some states, when an agreement cannot be reached by the start of the new fiscal year, legislatures will pass a temporary spending plan, or continuing resolution, to allow government payments to continue. In 2015, New Hampshire and North Carolina failed to pass a budget before the start of the FY 2016 fiscal year. However, lawmakers in both states agreed on temporary spending plans that kept government operating normally until a permanent budget was signed.

In Massachusetts, the governor is allowed 10 days to review the budget. In some years, the legislature will work up to the June 30 deadline, passing a temporary spending plan for the 10-day review period to avoid a government shutdown.

Other states have provisions to continue some or all of state funding even without a budget agreement. Wisconsin and Rhode Island, for example, allow appropriations to continue automatically. In both cases, funding continues at the prior year’s levels until a new budget is in place. Late budgets in Wisconsin are not uncommon, but the reason is not always a drawn-out disagreement over spending policies. Sometimes the automatic continuation simply allows the governor more time to review the budget before signing the bill.

Finally, the courts have intervened in some states to ensure that payments continue for certain government services in the absence of a budget, such as those related to public safety and contractual obligations. In Illinois, the courts have ruled that the state must continue to pay employee wages and pensions, among other things.

State Action

Over the years, some states have tried a variety measures of to discourage the late passage of a budget. In Washington state, failure to pass the budget 30 days before the start of the new biennium is a misdemeanor, though the penalty has never been applied.

After decades of late budgets in California, voters in 2010 approved Proposition 25, which prevents legislators from receiving paychecks if they do not send a budget to the governor’s desk by June 15 each year. Perhaps more importantly, Proposition 25 also removed a requirement that the budget be approved by a two-thirds majority vote in each chamber. Now, a simple majority is all that is required to pass the budget.

In New York, Governor Andrew Cuomo made on-time budgets a central part of his governing strategy, greatly improving the state’s on-time budget record. Previously, the state enacted late budgets for 20 consecutive years beginning in 1985. New York is the only state that begins its fiscal year on April 1, leaving lawmakers less time to negotiate the budget than in many other states.

In Minnesota, which has increasingly experienced challenging budget negotiations in recent years, lawmakers have proposed, but ultimately rejected, several attempts to create an automatic continuing appropriations measure.