By Corina Eckl
An esteemed group of public finance experts, practitioners and academics—collectively the State Budget Crisis Task Force—released a report today that examines and makes recommendations about state financial planning and reporting. The task force—co-chaired by Paul Volcker, former chairman of the Federal Reserve System’s Board of Governors, and former New York Lieutenant Governor Richard Ravitch—spent nearly three years studying, analyzing and debating the fiscal challenges facing states and their local governments. Its final report is a comprehensive and well deliberated piece of work worthy of state policymakers’ review. Overall, the report paints a very grim picture for states.
A Wall Street Journal reporter contacted us at NCSL to find out why the findings in our latest "State Budget Update" report differ so much from those of the State Budget Crisis Task Force. Our latest report shows nearly all states are optimistic about meeting their FY 2014 revenue targets. Moreover, about two-thirds of legislative fiscal directors describe their respective state’s fiscal situation as "stable." The answer for the difference between the two reports is simple.
NCSL’s "State Budget Update" report provides a snapshot of the states’ current budget situation by focusing on FY 2014 inflows and outflows. As measured against the circumstances of the past few years, when states faced huge budget gaps, state finances certainly have stabilized. NCSL’s report does not examine longer-term fiscal or economic concerns like unfunded liabilities, rising state debt levels or outmoded tax systems—topics addressed by the State Budget Crisis Task Force. When those problems are taken into consideration, the fiscal picture is dramatically different for many states.
The task force’s recommendations include some practical advice about how states can improve their fiscal and budgetary systems. They include adopting multi-year financial plans, adequately funding reserves, adopting budget standards and never treating borrowed funds as revenue, among others. Some states already have adopted such measures, though clearly not to the extent the Task Force recommends.
Corina Eckl is NCSL's director of state services.