We are currently eight months into the first year of the biennial budget that was passed in the waning days of the first session last June. That budget included $315 million dollars in new spending, putting the biennial budget at $6.7 billion dollars! In addition to that we added an additional $15 million just this past February to provide additional spending for education.
Supplemental budgets should be about funding emergencies or unforeseen crises, not simply to spend any surplus money that the state may take in, which is what has prompted this new debate about additional spending through a supplemental budget. Recently Michael Allen of the state Revenue Forecasting Committee indicated that the state will likely see approximately $75 million dollar in surplus revenues in this year’s budget cycle. We saw higher revenues than forecasted in income taxes, corporate taxes and sales taxes with a higher than expected increase in tourism based taxes. This is certainly good news for the state as we have struggled these past many years from a sluggish economy.
The governor has suggested that the surplus be placed in the Budget Stabilization Fund (BSF) in anticipation of any future financial shortfalls. Many leading economists and bond fund managers suggest that the state should carry a fund balance of at least 30 days of state expenditures, which would require about $400 million.
Today, we carry a fund balance of just under $111 million, which is only enough to run this state for about eight days. Adding the current expected surplus to the BSF would begin to bring us closer to where we should be. Having a good, solid fund balance also improves the states bond rating, which results in lower interest rates paid on bonds that the state issues for various projects: roads, bridges and conservation land purchases to name a few.
It wasn’t that long ago, in the late 1990s and early 2000s, that the state had a fund balance approaching $1 billion. Over the years that was spent down to nearly $0, which put this state in financial difficulties and our credit rating was reduced as a result. Slowly, this situation has improved, and that is a trend we need to continue.
While there are some items within the proposed supplemental budget that I believe are important to be funded, i.e., the county jails, state police and state warden’s pay raises to remain competitive and several other legislatively approved items, we shouldn’t be lumping them all into one bill with a lot of other spending that may seem nice but isn’t something that needs to be funding just eight months into the current budget cycle.
There is enough money in current state programs to pay for the priority items. We should uncouple the current proposed spending plan and prioritize those items that need immediate spending, and identify the source of funding within current state resources, and allow those items that are not to be carefully evaluated next January when the new legislature will begin discussing a new biennium budget.
The governor has agreed that if by next January there are priority, crisis spending needs, he will put forward a supplemental budget to address them. He has also agreed to find the funds in existing resources to pay for those items identified as an immediate need, especially the county jails and the state police pay.
With several referendum questions on the ballot this November that may have profound financial implications to the state and our economy, now is the time to take careful steps in our budgeting and spending needs. We need to be fiscally responsible with all taxpayer dollars.
— Rep. Bob Foley (R-Wells) represents House District 7. Rep. Karen Gerrish (R-Lebanon) contributed to this column.
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