As lawmakers return to Columbia tomorrow to resume this legislative session, they will already be prepared to deal with future budget shortages. Their plan includes a mechanism that will activate across-the-board cuts as soon as state revenues drop to a certain level.
Currently lawmakers don’t have that power. It’s in the hands of the state Budget and Control Board, on advice from the Board of Economic Advisers. Spending is cut when actual revenues are four percent below expected revenues, which are projected by the financial advisers. The proposed change would lower that to two percent, and the cuts would be automatic, unless all five members of the board vote against them. Currently the Board can ignore the trigger if it desires.
Senate President Pro Tem Glenn McConnell and House Ways and Means Committee Chairman Dan Cooper are among statehouse leaders jointly proposing a list of several changes, which also include greater financial reserves, and a “Streamline Commission” which will analyze inefficentcies in state agencies and programs, and whether they may be changed or eliminated all together.
Cooper says the idea behind fast-action cuts is to make them upfront. “That gives them a longer period of time to make adjustments,” he says. “For example, the five percent that was just cut. We’re halfway through the fiscal year. So that equates to a ten percent cut for the agencies. It’s harder to manage. If you take those cuts on the front end of a new fiscal year, it’s easier to handle with eleven months left in the year, instead of six. Then you hold capitol reserve funds for them on the other end.”
The Budget and Control Board implemented a five percent cut last month, and another four percent cut three months before that, striking a heavy blow to some state agencies.
Financial leaders in the statehouse want the General Reserve Fund to grow to five percent of state revenues. The current level is three percent. The two bills that would do that have already cleared the House and are sitting in the Senate.
Cooper says there is good reason for the changes in dealing with the state’s finances. “A lot of these things we came up with to keep the triple-A credit rating, which we think is very important,” he says. “Anytime you have someone go and bond money for construction or whatever, you get a better rate with a triple-A. We still have those with two of the rating agencies, along with one double-A plus. Very few states have that, still.”
Cooper says the Board of Economic Advisers currently examines two financial quarters of the fiscal year while making their recommendations. Another change would add a third quarter.
Senator Glenn McConnell sums up the purpose of the fiscal changes, using several questions: “How do we reform the budgetary process? How do we monitor for waste and needless spending, or less prioritized spending? And how do we get the right type of oversight in place for the long term, so that we don’t have those horror stories of inefficiencies coming out from our government agencies?”