State Governments as Victims

This was a news headline in the Wall Street Journal yesterday: “States’ Revenue Shortfalls Exacerbate Budget Crunch.” The article said that, “Faced with weak revenue, sluggish growth and possible federal funding cuts, many governors and state lawmakers face a tough budget season.”

That made me laugh. “States as victims” is a common storyline in the mainstream media anytime that state budgets are not growing gangbusters. States need to balance their general fund budgets each year, and so it is true that state policymakers must be more responsible that the spend-and-borrow politicians in Washington. But news stories on the states rarely provide the important context of how much budgets have grown over time.

The chart below—based on NASBO data—shows general fund revenues since fiscal 2010, with projected revenues for fiscal 2017. To achieve annual balance, the “tough” task of state policymakers is simply to keep spending rising no faster than these revenues.

Does the chart look like a “crunch” to you with “weak” revenue? And if 33 percent revenue growth over seven years and 3.6 percent projected growth in 2017 creates a “shortfall,” what do you think the problem is?