Commentary: One of the big differences between state and federal governments is that states are required to balance their budgets every year.
Keep that in mind the next time you hear a congressman bellyaching about the fiscal irresponsibility of the states.
The federal debt was just under $23 trillion at the turn of the last fiscal year, before the Covid-19 pandemic. The last time Congress passed a balanced federal budget was in 1996.
Since then, they’ve completely given up on the traditional budget process. They now fund the government with a series of continuing resolutions, simply repeating what has been done in the past, without any concern as to whether spending is in line with revenue.
States don’t have that option. Nor do they have the option of seeking protection under the nation’s bankruptcy laws, despite suggestions to the contrary by an ill-informed Sen. Mitch McConnell.
States have to make whatever spending cuts or tax increases are necessary to balance the budget every year. In 2017, then-Gov. Susana Martinez had to call a special session to make the emergency budget cuts needed to make up for an unexpected drop in revenue.
The situation in 2017 seemed like a crisis at the time, and it did result in deep cuts, especially to higher education. But it was caused by politics: a governor and Legislature of differing parties who couldn’t work together.
The crisis this time is real. And the hole is much deeper. It is estimated that revenue for this fiscal year could fall $2 billion short of expectations.
The other big difference this year is the 2018 court ruling ordering the state to spend more on education. Gov. Michelle Lujan Grisham had no reason to be concerned about that ruling when she took office and decided to abandon an appeal that had been filed by Gov. Martinez. But how will the state comply with it now?
It’s clear that the spending increases passed in the last session are not sustainable, and must be reconsidered in a special session. But rescinding those hikes won't be enough to compensate for both the economic shutdown caused by the pandemic and the drop in oil prices caused by a breakdown in international negotiations. The price for oil has bounced back from the day when it was trading for less than zero, but is still about half of what the state had based its budget estimates on.
And it’s not just the state. Municipal governments that rely heavily on gross receipts taxes will continue to see a huge drop in revenue until people feel safe to come out and freely interact once again.
They are the ones who pay for not just emergency services like police, fire and EMTs, but also basic services like trash collection and water delivery. All of those services are threatened when a municipality sees a drop in revenue.
Las Cruces has enough money in reserves to get by for a while. But a lot of smaller towns were already struggling with a loss in revenue caused by online shopping, and will now have to start making cuts to critical services if they don’t get some help.
Congress has passed nearly $3 trillion in relief packages for business and industry. That money has helped stabilize the economy and temporarily saved millions of jobs.
But it makes no sense to throw a lifeline to the private sector while allowing the public sector to drown. And if you think things are bad now, imagine if those basic services are interrupted.
Walter Rubel can be reached at waltrubel@gmail.com