New Revenue Forecast Emphasizes Need for Real Solutions

Today, the Economic and Revenue Forecast Council announced that the state general fund will have a $195 million deficit at the end of the 2009-11 biennium. This means that state revenue projections have fallen even further since the Governor signed the budget in May, thanks to the continuing sluggish economy.

The Governor’s budget office has suggested that the executive branch may take quick action to cut the budget in order to cover the gap. This would be consistent with the path the state has taken so far—relying almost completely on cuts to balance the budget.

The state needs a more balanced approach to the problem of inadequate revenue.

In the short term, there is enough money in the rainy day fund to cover the gap. There is no reason not to seek access to this money. This is exactly what the rainy day fund is for.

In addition, we must get serious about expanding revenue. There will be two more revenue projection updates between now and when the next legislative session meets in January. The state of the economy could very well get worse than it is now. It is worth noting that we are also likely looking at a 2011-13 biennium with insufficient revenue and no federal recovery funds to save the day.

In the meantime, the effects of the unprecedented budget cuts already enacted are starting to be felt. These cuts to state investments will do lasting damage to the progress we have made in previous years in creating a just and prosperous state for all.

Near the end of this year’s legislative session, a public conversation began about revenue reform. There was a proposal for a temporary sales tax that would have protected essential health care programs. It would have been paired with a Working Families Tax Rebate to provide a tax cut for lower income families. There was also a proposal for an income tax that would have ensured long-term improvements to our revenue system.

When the session ended, so did the conversation. It’s time to pick it back up because we are not out of the woods yet.