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(December 3, 2002 // link)

All across the country we are hearing from states and municipalities that are in fiscal crisis due to souring budget shortfalls. Howard Kurtz, Washington post staff writer recently wrote about the failure of the Media to cover this crisis, and the failure of politicians to address it in the recent mid-term elections. Nobody is talking about it because nobody has a plan to address the problem.

The problem is huge. California’s $21 billion dollar budget shortfall is expected to get even worse. New York is facing a $10 billion gap while New York City is looking to the State for assistance with its projected $6 billion deficit. New Hampshire is looking at a deficit of approximately $40 million. The National Association of State Budget Officers and The National Governors Association recently said in a joint report that states from coast to coast are facing “the most dire fiscal situation since World War II.”

So why was this not a big issue in the recent elections? Mainly because no one asked the difficult questions, and because politicians are reluctant to discuss the issue because they have no clue as to how to address it. What is equally troubling is that, with this crisis looming, there are still state legislator calling for tax cuts or resisting the concept of even moderate tax increases. In California, for example, the Los Angeles times quoted that Senate Republican Leader Jim Brute as saying “I don’t see any republican votes” for higher taxes. The only other available option, if you look at the problem from a traditional budgeting approach, is to make draconian budget cuts. At the same time a pragmatic New York City Mayor is proposing cuts in services combined with a $4 million tax increase to address his cities woes.

Bob Herbert, in his recent New York Times column entitled aptly “States of Pain”, offered that “there are those who have long dreamed of the day when governments would be so drained of revenues that they would have no choice but to call a halt to many of their functions.” He further suggests that “The realization of that dream is getting closer, in part because its tragic implications remain obscure to vast segments of the public served by those governments.” That’s where the media missed the boat in the last election. They did not ask politicians to address the issue or to offer solutions to the problem and they did not get the word out.

That is not to say that the Media is to blame for the problem. It is the ultimate responsibility of elected state representatives to determine how best to balance state budgets (as most States, including New Hampshire, are required to do by state Constitutions or Statutes). To do so however, they must look beyond the traditional model and seek long range solutions that recognize that we function within the parameters of a national and global economy that directly effects local and state fiscal planning. In short, we have to start thinking outside of the box.

Bob Herbert recently wrote another article on the subject in which he discussed an interesting interview with Felix Rohantyn, the financial wizard who guided New Your through the fiscal crisis of the 1970’s. Mr. Rohantyn suggests that there ought to be a national program, essentially a revenue-sharing program, to deal with the problem. He said: “There ought to be some kind of coalition of mayors and governors to petition the congress as well as the administration for, say, a three-year program of special assistance to state and local governments financed by federal borrowing, since the federal government can do things we can’t, namely run a deficit”.

As long as the federal government requires us to pay federal taxes and to comply with unfunded federal mandates, this will remain a national problem. Refusing to adopt federal programs and thus losing federal funding is not a realistic option for states and municipalities in a national economy. Individual taxpayers will certainly not be relieved of their federal tax liabilities by virtue of the fact that their states don’t accept federal funds.

It is going to take strength to avoid taking a traditional reduce spending or increase taxes approach to this problem in New Hampshire. State and local services are already cut to the bone. The budget crisis facing the state court system is a prime example. What it will take is fresh and creative thinking. It remains to be seen if the recent election has produced anyone with the right stuff to think outside the box.

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Copyright 2003 Edward Philpot

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