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West Virginia is not alone with its budget problems

West Virginia budget planners met Wednesday to resume work on crafting a spending plan for next fiscal year.  The proposed budgets by Governor Tomblin and the Republican-controlled legislature imploded last week when the administration revealed the hole in FY 2017 budget is $92 million deeper than first thought, and is now approaching $240 million out of a $4 billion budget.

West Virginia is not alone.  A number of states, particularly those that rely on energy production as a source of tax revenue, are struggling to balance their budgets.

The drop in oil prices has hit Alaska hard. Governor Bill Walker told lawmakers this week he needs spending cuts, a tax increase and a restructuring of the Permanent Fund (a portion of oil revenues set aside for future generations) to cover a projected $3.5 billion budget deficit.  Meanwhile, Alaska’s bond rating has been downgraded.

Connecticut is facing a $266 million budget deficit this fiscal year and a $900 million shortfall next year out of a $20 billion budget. Governor Dannel Malloy has ordered $65 million in spending cuts starting April 1st. The Hartford Courant reports the cuts “are spread among more than 40 departments and agencies, so called safety net services are hit particularly hard.”  Even the Connecticut Children’s Medical Center is being cut $730,000.

Louisiana has cut spending three times, raised taxes and used $128 million from the state’s rainy day fund to deal with a projected deficit of nearly $1 billion this budget year, but there are more problems ahead.  Projected revenues for next year are $750 million below expenses.  Lawmakers expect to meet in special session in the new budget year to approve another round of tax increases.

North Dakota’s days of budget surpluses during the oil boom ended with the price plunge.  Governor Jack Dalrymple ordered four percent budget cuts and borrowed nearly $500 million from the state’s rainy day fund to cover a $1 billion budget shortfall.

Pennsylvania lawmakers and Governor Tom Wolf finally reached a budget compromise Thursday, ending a nine-month long impasse. “We need to move on (from 2015-16),” Wolf said. “We need to confront the real challenge we have in the (2016-2017) budget.”  Meanwhile, Illinois’s Republican governor and Democratic legislature are still at odds over a spending plan for this year.

The Casper, Wyoming Star-Tribune reports, “Low prices for coal, natural gas and oil have sapped state revenue, forcing the legislature to cut spending for almost all state services and tap into a savings account.” Describing the state budget and the projected $477 million decline in projected revenue over the next two years, Governor Matt Mead said, “There’s no way to perfume the pig. It was a tough session.”

Unlike the federal government, states cannot print money.   Some states, like West Virginia, prohibit themselves from running deficits.

Those restrictions mean state leaders must make difficult decisions, especially when economic conditions cause revenue to fall.  However, they also provide for fiscal solvency because government must live within its means.

That’s a lesson that the federal government, which is now over $19 trillion in debt, could learn.





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