A National Conference of State Legislatures report released today is sparking gloom-and‐doom headlines about states in fiscal crises. Conspicuously absent from the news stories is any mention of the root cause of the “shortfalls” supposedly wrecking havoc in state capitols. Over the last few years, state lawmakers forgot the lessons of the 1990s, and decided to add new programs and significantly expand general fund spending on existing programs.
Now, according to NCSL:
Current state fiscal conditions are being driven by weak revenue performance. State officials expected revenue growth to slow in FY 2008, but not as dramatically as it has. […] Because most FY 2008 budgets were built on revenue forecasts that are not materializing as expected, budget gaps have grown.
This reminds me of a short story by J.D. Salinger in which the main character describes the tragic lives of “bananafish:”
Well, they swim into a hole where there’s a lot of bananas. They’re very ordinary‐looking fish when they swim in. But once they get in, they behave like pigs. […] Naturally, after that they’re so fat they can’t get out of the hole again. Can’t fit through the door.
In FY 2007 alone, states raised general fund spending by 9.3 percent, well above the 30‐year average of 6.4 percent. 18 states saw spending rise by at least 10 percent. The only real news here is that state governments are finding themselves in a fiscal “hole” because they gorged on revenues when times were good, and now they have been fat so long they forgot how to go on a diet.