A report released Tuesday shows that states face up to $4 trillion in unfunded liabilities and a host of other fiscal problems.
Delaware Gov. Jack Markell (D), who was elected National Governors Association chairman Sunday, said that several of the recommendations in the report issued by the State Budget Crisis Task Force will be helpful for budget planning and should be used to elevate budget discussions.
The task force was founded by former Federal Reserve Chairman Paul Volcker and former New York Lt. Gov. Richard Ravitch (D), a nationally recognized expert in state financial issues. "I think when people like Paul Volcker and Dick Ravitch weigh in, it is helpful," Markell told HuffPost, noting that while governors are "aware of the challenges," many others are not.
The dire fiscal portrait for states needs to be addressed before more dramatic cuts to social services and public safety are needed, said Volcker and Ravitch. The task force, which was funded by several foundations, made a series of recommendations including an end of borrowing to pay state operating expenses, multiyear fiscal planning, transparent finances, a move away from cash-based budgeting, addressing pension obligations, reforming health care, and more communication between the federal and state governments regarding finances.
Markell said that he and other governors want more communication between the federal and state levels on finance. The report called for the reactivation of the Advisory Commission on Intergovernmental Relations, a Nixon-era agency cut in the 1990s that provided research on the relationships among governmental entities and a forum for discussions. Markell said that while he is not familiar with the specific work of the defunct agency, he believes forums are needed going forward.
"The more that we can do to explain the impact on states and our budgets would be helpful," he said.
Markell said he believes most governors are trying to end the use of "one-shot" revenue sources to plug budget holes and rely on longer-term revenue for budgets. Markell could not address states borrowing to cover operating expenses, noting he is prohibited from doing that in Delaware.
Multiyear fiscal planning and financial transparency is a benefit for state governments, Markell said, noting that it has been used in Delaware for several years. Delaware has two-year financial plans put together to help guide revenue projections and state spending, he said. But while Ravitch and Volcker call for four-year plans, Markell cautioned that the longer-term plans would include longer-term projections that would not be as accurate.
Markell agreed with the task force report that revenue projection should not be a political exercise during the budget process. "What you want your elected officials to do is to make decisions on how to spend money," Markell said. "You don't want them to make a decision on how much there is spend. Picking a number to be a basis of budgeting should not be political."
Pension issues are continuing to be ones that states are grappling with as part of the budget issues, said Markell. While Delaware paid state obligations to the pension fund, he said he has worked on reform issues in the state as part of the long- term outlook.
Looking ahead, Markell said that governors are going to continue in "a new normal" when it comes to budget and finance, which he said has governors operating in two worlds.
"In prior years, governors had to have one fight with legislators, that was how to spend incremental revenue on the table. Now we have two fights, where to cut to find revenue and then to invest in priorities."
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