Though you might not have been aware of it, this year is critical for the state budget. Together, we have been through two years of extensive budget cutting and are just now starting to see the light at the end of the recession tunnel.
The light in the distance is indeed cause for celebration, but we aren't out of the tunnel yet. How we handle the difficult budget decisions ahead will determine whether we have earned passage out of the Great Recession.
Despite two years of cuts, we find ourselves $313 million short of meeting the state's on-going budget needs. This is partly due to expiring federal stimulus funds and partly an overall effect of an economy that has shrunk significantly since the boom years of 2007-2008.
This shortfall estimate does not include the additional funding needs in high growth areas like public education, higher education, and Medicaid. Our assets include $210 million remaining in the Rainy Day Fund and an anticipated economic growth of $250 million this fiscal year. However, once one combines our assets and liabilities, it quickly becomes apparent we just don't have enough money to cover everything.
What would you do if your take home pay was less than your mortgage? More than likely you would find additional income or reduce your household expenses. As a state we are exempt from the laws of prudent finance. I am not in favor of increases to our income through tax increases. It leaves only the alternative, reducing our expenses.
Given the financial pain experienced by every citizen of the state over the last two years, I was frankly astonished earlier this week as my Democratic colleagues in the Legislature suggested that they were okay with a structural budget imbalance, floated the idea of running a deficit and suggests two possible tax increases!
Haven't we learned from the folly of living beyond our means and using credit for on-going expenses? In both public and personal finance the story of the Great Recession has been the collapse of the balloon. Everyone thought we could spend today and put off paying until a far-off tomorrow. When the balloon popped, families and governments were left scrambling to pay for mortgages and hefty entitlement programs they had agreed to when times were flush and credit plentiful.
The pain of budget cutting over the past two years has impressed upon me a very important lesson. Budgets must balance, on-going expenses and on-going revenue sources must be paired and credit is to be used sparingly.
Cutting budgets is hard, painful and dirty work; I do not relish the task. During the past two years, I have listened to many passionate pleas to fund various programs.. Those of us in the hot seat forced to reconcile financial realities with imploring faces find few friends during budget time.
The easy way out is to punt the hard decisions away to some future Legislature and to borrow money to keep everyone happy. It is a slippery slope and one need look no further than Congress to see that following the path of least budget resistance leads to an ocean of red ink.
It might not be the politically popular choice, but I believe we need to live within our means. If our revenue growth doesn't match budget shortfalls, then I believe we need to trim our expenses. Rainy day funds ought to be used judiciously since they are finite and non-renewing.
We spent over half of the Rainy Day Fund last year and have found it is still raining a year later. Who is to say we won't still be enduring a steady drizzle next year or the year after? It wouldn't be wise to completely deplete the fund, but rather to dip into it judiciously for essentials only.
Our parents and grandparents learned an enduring lesson in frugality after the Great Depression. Are we so quick to forget the lesson of our Great Recession because we didn't experience bread lines or tent cities?
Don't be fooled by those who claim you can have it all for no money down and a credit card balance to be paid later. There is always a price to pay. I for one, would rather pay the price now so our futures are unencumbered with the debt of the past.
Republican Rep. Brad Dee is the majority leader in the Utah State House of Representatives. He represents House District 11, which covers portions of Davis and Weber counties.