I have good news and bad news. The good news is that, as a state, we finally hit our revenue projections. The bad news is that we finally hit our revenue projections.
What does this cryptic message mean? Just that instead of being $700 million in the red, the new revenue projections show only a $640 million budget gap. Who would have thought two years ago that such news would be cause for celebration?
The recession has forced us to cut deeply into state budgets in order to stay financially afloat. For the past two years, each and every revenue projection has shown a free fall decline in tax revenue ... until now. The revenue projections from November 2009 through February 2010 were stable for the first time in many quarters and demonstrate that we have reached the bottom of the financial decline.
It would have been nearly unthinkable just two years ago to rejoice in revenue estimates showing the budget hole $60 million less than originally believed, but the recession has made good news harder to come by and so we must find good news where we can. While the projections don't yet hint at economic recovery, they are a very important indicator that the worst is over. Our efforts to stem the recession can now be refocused to aid recovery.
Our revenue projections have been highly unstable since early 2008, which made it very difficult to craft reliable budgets. Just when we thought we had balanced the budget, we would learn that revenues had declined, necessitating further cuts. Mid-fiscal year budget cuts are always difficult for departments to absorb because some funds are already "under contract" and can't be cut.
Departments then end up cutting "available" items, which might not be the best place to cut, but more accessible. Now that our revenue projections are more stable, we can craft budget without having to reopen them mid-year. Based on the current projections, we won't need to make any further reductions to the 2010 budget and the picture for the 2011 budget is better than thought just a week ago.
The effects of the recession are still far from over and will be felt for many years. Obviously, we must deal with the immediate need to cut $640 million from the 2011 fiscal year. We still must account for the loss of $460 million in one-time federal stimulus funding that propped up portions of our budget last year.
And, we must also consider the structural imbalance the recession created in our budgets. The Legislature's attempt to adhere to the fiscal principles of using one-time funds for one-time uses and on-going funds for on-going uses was at times thwarted by the recession. One-times funds were used to plug critical holes in on-going programs, but since one-time funds are a volatile and unpredictable, we can't count on them to continue to plug the holes forever.
None of these problems have simple or easy answers, and but at least we know the numbers aren't as bad as originally thought. We can now look more hopefully on our financial future. We can make more reliable budget decisions and feel more comfortable spending our Rainy Day Funds without fearing the worst is lurking around the next corner. These projections also ease the need to consider a general tax increases. It is as if we have finally stepped off a wild roller coaster ride and gained a new appreciation for flat ground. Perhaps in time flat, stable budget projections might be of great concern, but for now, it is much better than the alternative.
Rep. Brad Dee is the majority whip in the Utah State House of Representatives. He represents House District 11, which covers portions of Davis and Weber Counties