Last week we made great progress on the 2009 rescission bill. We were able to reach agreement with the Senate in Conference Committee and the compromise passed both Houses Thursday by healthy margins. It makes $325M in adjustments, including just over $200M in true expenditure cuts in the current year. Without the cuts, the State would end the fiscal year in the red, a constitutionally impermissible situation.
Although K-12 public education accounts for 51% of all state spending, it will take only a 1% cut, a fraction of what other agencies will take, including public safety and social services. We were able to hold our position to assist with additional funding for physical disability waivers, reducing or eliminating the current waiting list. We were, unfortunately, unable to get the Senate to budge of it’s not to add the additional funds the House added to help with the developmentally disabled waiting list.
Even with the limited cuts to education, the governor has threatened to veto the school cut provision. Friday she exercised her authority to make forced cuts in spending to stop the payment of tax relief payments to local units of government, but plans to turn around and ask us today in the state Finance Council meeting to issue more certificates of indebtedness to address cash flow problems the State is having this month. Our chief fiscal analyst was left scratching his head over this maneuver. Before seeking an intra-governmental loan, the Governor simply needs to sign the budget rescission bill and allow those cuts to address cash flow. Her strategy is fiscally unsound and repeats the mistake she made before the session began when instead of ordering reductions in expenditures to come into line with revenues, she sought intra-governmental loans. It’s as though she does not yet grasp the extent of the fundamental problem the state is having with government spending greatly outpacing revenues.
The daily buzz over whether the Governor will be offered a cabinet position has created an unfortunate distraction at a time when there needs to be an unwavering focus on the budget. The status of the so-called Stimulus package in Washington is also an unwelcome distraction. Some suggest this one-time infusion of federal funds is an answer to our current budget woes. Nothing could be further from the truth. We can ill afford to use federal borrowing to support agency budgets that would require and recurring source of revenue in future years when federal funds would not be forthcoming. No, what we need to do is simply get a handle on government spending that exceeds state revenues. Stimulus money may be helpful in shoring up our ending balances, pay down debt, create a economic development incentives fund and address some infrastructure needs, but it is certainly not a substitute for making fundamental changes in the way we craft annual budgets.
We will be debating this week a comprehensive energy bill passed out of the Energy Committee late last week. It incorporates many of the provisions sought by Governor Sebelius and includes a broad mix of energy sources for future energy needs from renewable resources such as wind, hydro and solar to the reliable and affordable base load energy sources of coal and nuclear power. I expect strong bi-partisan support.