Are States Helpless Victims, or Crying Wolf on Budgets?

February 1, 2017 By E.J. Smith - Your Survival Guy

You may have read in the WSJ yesterday: “States Revenue Shortfalls Exacerbate Budget Crunch.” My friend Chris Edwards, director of tax policy studies at Cato, had to laugh at the “states as victims” part. You’ve probably guessed why:

“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 than 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?

E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.

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