Legislature tackles small slice of shortfall; need for revenue persists

The Legislature has adjourned the special session, culminating its work with the passage of a budget bill that resolves about a quarter of the $2 billion shortfall.  This initial crack at the budget reduces the shortfall by $480 million through a combination of cuts, fund transfers, and a small amount of additional revenue from the sale of unclaimed property (Figure 1).

While this marks an initial step towards passage of a full budget, the difficult decisions have now been pushed into regular session set to start the second week of January. The magnitude of the remaining shortfall demands that policymakers raise new revenue to protect core public services.  

There are various options for raising revenue, but no single option is a silver bullet to getting our state out from under the effects of the recession and guaranteeing our future prosperity. What is required is a comprehensive approach that addresses our immediate needs and ensures our long-term stability:

• Our immediate need for revenue can be achieved by closing wasteful tax breaks and temporarily increasing the sales tax. 
• Pairing a sales tax increase with funding for the Working Families Tax Rebate would significantly reduce costs for lower-income working families with children.
• To ensure our long-term prosperity and stability, policymakers must consider reforms that address our structural revenue problems, such as enacting an excise tax on some capital gains— profits from the sale of stocks, bonds, futures contracts, and other high-end financial assets. Additionally, we are long overdue for an overhaul of the way we account for special tax breaks in our budget process..

When the Legislature reconvenes for the regular session, they will need to take bold action to address the remainder of the shortfall and get our economy back on track. Our future prosperity is dependent on our ability to make investments in things that grow our economy: education, health care, and work supports. To achieve this we must raise revenue.