September 3, 2015
The State of Illinois is often cited for its unique financial challenges. However, at least in one respect, Illinois does not stand alone in its financial difficulties.
Illinois is one of four states that began the fiscal year without an enacted budget and is one of three still struggling to produce a spending plan in the third month of the fiscal year. As discussed here, although Governor Bruce Rauner signed the education portion of the budget, he vetoed the remaining appropriations bills and the State has moved into the fiscal year operating on spending authority provided through continuing appropriations and mandated payments due to court orders and legally binding agreements.
Wisconsin, North Carolina and Pennsylvania also entered the fiscal year, which began July 1, 2015, with unresolved budgetary stalemates between their executive and legislative branches. According to a survey by the National Association of State Budget Officers, 45 states had enacted and approved budgets by the start of the fiscal year. New Hampshire enacted a temporary budget and Alabama does not begin its fiscal year until October 1, 2015.
Wisconsin resolved its impasse rather quickly, enacting a budget on July 8 that was signed by Governor Scott Walker on July 12. It was a rare situation that a state with a governor from the same party that controls the legislature would end up in an overtime budget session. The conflict between the Republican leaders in the legislature and Governor Walker, also a Republican, reportedly centered on three issues including the transportation budget, providing public subsidies for an new basketball arena in Milwaukee and a proposal by the Governor to repeal prevailing wage laws.
The two-year budget for Wisconsin totals $72.7 billion. The spending plan cuts $250 million from the higher education budget, excludes additional transportation funding and does not include money to build a new basketball arena for the Milwaukee Bucks. The bill did include a provision to repeal the state’s prevailing wage law for local governments, which determined the minimum amounts that could be paid to construction workers hired for road, school and other public infrastructure projects.
North Carolina also has a two-year budget but has been operating on monthly continuing spending authority measures since its fiscal year began. Typically the budget is issued at the beginning of the biennial then revised after the first year to adjust for changes in revenues and spending pressures. The current budget year is the first half of North Carolina’s 2016-2017 budget.
Even more unusual than Wisconsin, the North Carolina executive and legislature are controlled by the same party and the State reported a $445 million surplus at the end of its 2014-2015 budget. The core of the argument that is delaying a final budget in North Carolina is how much the State should increase spending on education. Governor Pat McCrory proposed a 2.7% increase for education, which was intended to reflect population growth and inflation. The state Senate enacted a budget with the increase proposed by the Governor but the House version of the budget included a larger 5.0% increase in education funding. The different funding proposals hinge on the Senate’s attempt to eliminate funding for 5,000 teachers’ assistants in favor of hiring an additional 2,000 teachers to reduce overall classroom size. The House’s budget included funding for the additional teachers and assistants at a cost of approximately $500 million.
The most recent temporary spending authorization for North Carolina expires on September 18 and the legislature has agreed to skip its Labor Day break in order to continue negotiations on the full budget.
More similar to Illinois, Pennsylvania’s budget stalemate involves negotiations between an executive branch and legislature that are controlled by different parties. Governor Tom Wolf, a Democrat, proposed a $31.6 billion budget but vetoed the spending plan passed by the Republican controlled legislature totaling $30.2 billion, which received no support from the minority party.
Governor Wolf’s budget relied on an increase in the individual income tax and expandsion of the sales tax to include additional services in exchange for a reduction in property taxes and a renter’s rebate up to $500 for individuals making less than $50,000 per year.
Republicans in the Pennsylvania legislature rejected the tax swap as a tax increase and the two sides have made little progress in coming to terms since the budget year began. Meanwhile, unlike Illinois, the Pennsylvania schools have begun opening without any appropriations available from the State. Instead they have relied on local funds, budgetary reserves and bridge loans to pay for operating costs.
Also differing from Illinois, Pennsylvania’s human services providers are mostly relying on borrowed funds to stay open because they are not privy to federal consent decrees, court orders and legal settlements that in Illinois require the State to provide payments to many programs even as a budget remains elusive.