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Posted at 9:38 AM ET, 02/ 9/2011

How much more should the states cut?

By Ezra Klein

2-4-11sfp-f2.jpg

Over the next few days, the Obama administration is going to propose some financial help for the states. Congressional Republicans, who've adopted a tough-love attitude to the states that found their fiscal position rocked after Congress and federal regulators neglected to notice that Wall Street had gone totally berserk, are not happy about it. They want to see the states dig out of their holes by cutting spending further. But how much further?

Nearly all states are proposing to spend less money than they spent in 2008 (after inflation), even though the cost of providing services will be higher. Most state spending goes toward education and health care, and in the 2012 budget year, there will be more children in public schools, more students enrolled in public colleges and universities, and more Medicaid enrollees in 2012 than there were in 2008. But among 26 states which have released the necessary data, 21 states plan to spend less in 2012, after inflation, than they did in 2008, and only two — Alaska and North Dakota — expect to spend significantly more. Total proposed spending would be over 10 percent below 2008 inflation-adjusted levels.

That's from the Center on Budget and Policy Priorities' latest analysis of state fiscal plans. And that second sentence is an important one: When you say states should cut spending dramatically, you're saying they should cut funding for education and health-care services dramatically. And they -- or at least 22 of the 31 states that have released their plans for 2012 -- are:

-At least 13 states have proposed deep cuts in pre-kindergarten and/or K-12 spending. The governor of Mississippi proposes education spending that fails for the fourth year in a row to meet statutory requirements enacted to ensure adequate funding in all school districts. (The three previous years of underfunding have cost over 2,000 school employees their jobs.) The Texas budget proposal would eliminate pre-K funding for nearly 100,000 mostly at-risk children — over 40 percent of the state’s pre-kindergarten students.

-At least 15 states have proposed deep cuts in health care. In Arizona, the governor’s budget would cut health care for 280,000 poor individuals. Washington’s governor proposes eliminating affordable health care for more than 60,000 low-income residents.

-At least 11 states have proposed major cuts in higher education. Arizona would cut state support for public universities by one-fifth; when combined with previous cuts, this would reduce per-student state funding 46 percent below pre-recession levels. California’s governor proposes to reduce funding for the state’s two university systems by $1 billion. For one of those two systems, the University of California system, the cuts would bring spending down to the fiscal year 1999 level — when the system had 31 percent fewer students than it does today.

It bears repeating that one of the most dangerous things an economic downturn can do is reduce your potential for long-term economic growth. Deep cuts in education funding that lead to fewer kids getting quality pre-k and fewer students attending college are one mechanism through which that can happen.

By Ezra Klein  | February 9, 2011; 9:38 AM ET
Categories:  Budget  
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Comments

Republicans sort of understand that rising tides lift all boats. They call it trickle down economics.

But they don't seem to want to admit that lowering tides also sinks all boats. They tried to convince people that only "liberal" states were doing bad because of liberal policies, but then we discovered that all states were having similar problems (and indeed, many "socialist" countries are faring better than the US).

Posted by: lauren2010 | February 9, 2011 10:08 AM | Report abuse

--*It bears repeating that one of the most dangerous things an economic downturn can do is reduce your potential for long-term economic growth. Deep cuts in education funding that lead to fewer kids getting quality pre-k and fewer students attending college are one mechanism through which that can happen.*--

Maybe stuffing all your education eggs in one stupid basket isn't such a smart idea, eh, Klein?

Live by government, die by it, and don't expect any sympathy from me.

Posted by: msoja | February 9, 2011 10:21 AM | Report abuse

That's your government, drowning in a bathtub.

Posted by: RZ100 | February 9, 2011 10:34 AM | Report abuse

I would like to see Federal legislation proposed that would limit the amount that donor states, like NJ and Cali, can give to the Feds. Something like they must get back at least 90% of what they send to the Feds.

And the receiver states can get only 110% of what they send to the Feds.

Of course, this would cause all kinds of party line splits where the donor states would be on one side and the receiver states on the other. We would see who is serious about fiscal responsibility.

And it would be very fun to watch.

Posted by: grat_is | February 9, 2011 10:43 AM | Report abuse

"When you say states should cut spending dramatically, you're saying they should cut funding for education and health-care services dramatically."

Or cut unsustainable public employee pensions.

The Federal government should do something similar to the Race for the Top program in Education. States that reform their long term liabilities by renegotiating things like unsustainable pension funds should be helped with Federal dollars and/or interest forbearance. Or, just amend the bankruptcy code to allow the states to reorganize their finances in Federal bankruptcy court and shed liabilities to bring themselves solvent again.

Posted by: jnc4p | February 9, 2011 11:10 AM | Report abuse

Imagine two states. Both have the same number of Congressional Districts, both have about 19 million people, and both have budget shortfalls. One state has proposed $6 billion in budget cuts the other has proposed $10 billion in budget cuts. Would it surprise you to find out that the state with smaller cuts has a budget half the size of the state with the larger cuts?

Well its true in today in real life

New York - $10 billion or so in cuts proposed

• Total Budget Proposed – $132.9 billion
• http://www.nytimes.com/2011/02/02/nyregion/02budget.html

Florida - $6 billion or so in cuts proposed

• Total Budget Proposed – $66 billion
• http://www.miamiherald.com/2011/02/07/2054753/gov-scott-to-unveil-budget-with.html

Posted by: powers1616 | February 9, 2011 11:48 AM | Report abuse

If Obama wants to give money to the states, why doesn't he get rid of the excess (yeah right) and let the states handle some issues alone?

Posted by: jbeeler | February 9, 2011 12:14 PM | Report abuse

Rising tides lift all boats, but if you are staked to a post on the beach they don't help much.

As for how much should states cut -- your answer should be determined by how much you want the US to look like Haiti in 5-10 years. Slash public ed and state universities and we too can be a true Third World banana republic.

Posted by: John1263 | February 9, 2011 1:09 PM | Report abuse

"I would like to see Federal legislation proposed that would limit the amount that donor states, like NJ and Cali, can give to the Feds. Something like they must get back at least 90% of what they send to the Feds."

Massachusetts pays so much more in federal taxes than it receives back from the federal government, that if it instead just broke even, it could eliminate its state income tax and still come out ahead.

Posted by: DavidinCambridge | February 9, 2011 1:19 PM | Report abuse

As usual, on cue, blame the workers who do your state and local jobs for you.

Pensions are certainly a concern, but primarily because states did not do their part in funding them whem the stock bubble was happening, and also because of the gross mismanagment of the national economy under republicons which led to the crash of 2007.

You should not be attacking public employees because they have pensions. You should be demanding them from your employers. Instead of giving millions in bonuses, instead of siphoning off massive qualtities of cash to invest in China, instead of using corporate earnings to pay obscene immoral salaries to executives who do little to nothing in terms of adding value, they should be using that money for the future of the nation by having a viable pension system as part of the overall retirement structure of the nation. If corporations were doing their part the etirement system would not be such aburden on taxpayers. 401 k plans were introduced during the reagan nyears as a SUPPLEMENT to social security and pensions. The intention was that it gave an incentive to increase employee based savings to add to the retirement income of social security AND your pension. Employers have duped the workforce into accepting ONLY the 401k - which takes them off the hook and allows them to waste trillions of dollars generated by YOU and put it into their own pockets.

Wake up. Public sector employees should be your MODEL, not your target. They unionize to protect their rights as employees, and to use their collective voice against an otherwise insurmountable opposition. You should be doing the same instead of whining about wah wah I don't get a pension. You want your empployers to stop hiring immigrant workers on HB1 visas? Unionize and use your power to stop them. Want them to give you better working conditions? Better pay? A pension? they will not do it from the kindness of their hearts - ever. they see you roll over and lick their boots and then attack other working people and they laugh at you over caviar and champaign on their yachts in the islands.

Posted by: John1263 | February 9, 2011 1:23 PM | Report abuse

John, if private sector workers ask for public employee style benefits, employers tell them to get lost. Haven't you heard there's 9% unemployment out there? Given all this why should the public sector not share the pain of wage and benefit cuts?

Posted by: MrDo64 | February 9, 2011 1:53 PM | Report abuse

Yes Ezra, most state spending is in the form of education, medical care and retirement. I have a strong feeling that people like the sound of "budget cuts" until it hits them directly in the gut via reduced retirement benefits and medical care. Then the tune will change. I believe most people still believe the Reagan mantra that government is bloated with fat and most cuts won't be felt except by illegals, the lazy-poor and the lowest socioeconomic class of humanity that cannot stand up for itself. Not true of course.

The entire effect of cutting taxes is to put the burden of costs on the backs of users via fees. For example, the era of public ed may coming to and end with 20% cuts. If you have kids, then you pay to send your kids to K-12 as you do college. People without kids won't have to. It will surely de-incentivize having kids.

The endgame in all this, of course, is to create vast differences in the economic classes of Americans. The rich will be filthy rich and the poor will be helplessly poor, with more of them.

My grand prediction is that when MC and SS benefits are cut to dust, retiring Americans will leave the good ole USA in droves for other welcoming countries that provide better/cheaper health care and lower costs of living. I will be in that group b/c I don't want my $100k per year retirement income entirely eaten up by over priced medical care. We will have lots of good destination choices out there. The global economy has greatly elevated the economics and standard of living in many formerly 3rd-world countries making them very habitable but still relatively cheap.

Posted by: gfoster56 | February 9, 2011 2:19 PM | Report abuse

Ezra is posting his patently dishonest pro government blather.

Tell me lefties, what happened to state spending between 1990 and 2008?

Posted by: krazen1211 | February 9, 2011 2:24 PM | Report abuse

"For example, the era of public ed may coming to and end with 20% cuts. If you have kids, then you pay to send your kids to K-12 as you do college. "

"It bears repeating that one of the most dangerous things an economic downturn can do is reduce your potential for long-term economic growth. Deep cuts in education funding that lead to fewer kids getting quality pre-k and fewer students attending college are one mechanism through which that can happen."


What BS! The massive, gross, unjustified fat cat excess of education spending has NOT led to economic growth.

Education
Fiscal Years 1995 to 2015 Year GDP-US
$ billion (2005) Education -total
$ bln 2005
1995 9093.7 491.14 a
1996 9433.9 500.09 a
1997 9854.3 518.66 a
1998 10283.5 548.39 a
1999 10779.8 574.81 a
2000 11226 615.56 a
2001 11347.2 637.44 a
2002 11553 676.77 a
2003 11840.7 689.60 a
2004 12263.8 707.89 a
2005 12638.4 735.28 a
2006 12976.2 765.65 a
2007 13254.1 766.54 a
2008 13312.2 791.69 a
2009 12990.3 777.06 e
2010 13112.1 825.98 g

All this has led to the massively antigrowth Obama administration. Economic growth was higher during and after periods of LESS education spending.

Posted by: krazen1211 | February 9, 2011 2:27 PM | Report abuse

"I would like to see Federal legislation proposed that would limit the amount that donor states, like NJ and Cali, can give to the Feds. Something like they must get back at least 90% of what they send to the Feds."

Sure. And for the 50 million Medicaid people and the 45 million Obamacare people, I would like to see legislation passed saying that they can only collect Medicaid benefits equal to 90-110% of their federal income taxes paid in the last calendar year.

Posted by: krazen1211 | February 9, 2011 2:30 PM | Report abuse

Why not outsource? Half of the states could outsource their higher education to a neighboring state, increasing that states revenue, and lowering the outsourcing states costs, plus the added revenue from the sale of university property.

Since most students can use distance education anyhow, this would place no new facilities burden on the remaining universities.

Posted by: Don19 | February 9, 2011 2:50 PM | Report abuse

The states, especially the Blue ones, got themselves in this mess and must get themselves out. The handouts from Fed Goc and Obama are over, as the HOuse GOP will make sure any handouts are removed from the budget. These overspending states will NEVER make the necessary cuts until they are forced to.....and now is the time!

Posted by: Realist201 | February 9, 2011 3:48 PM | Report abuse

Not a chance! No way will Obama be allowed to bail out those blue states who have staggering loads of debt and have chosen to do nothing to help themselves. The rest of the country wants to watch CA, IL and NY sink below the horizon with that mountain of debt they made for themselves. I wouldn't miss this spectacle for anything in the world.

Thankfully the House belongs to Republicans and nothing Obama can do but watch them say "no".

Posted by: Desertdiva1 | February 9, 2011 4:16 PM | Report abuse

I live in Florida where "Tricky Ricky" Scott was somehow elected. He wants to cut the state budget to shreads...The state is up for sale for the benefit of his corrupt business friends, and to hell with everybody else...Scott is shady, corrupt, a fruad, a thief, and liar....He will be impeached and/or forced to resign his office before his term is up.....

Posted by: gene6 | February 9, 2011 4:52 PM | Report abuse

There's less money now.

Posted by: staticvars | February 9, 2011 4:59 PM | Report abuse

50%

Posted by: jy151310 | February 9, 2011 6:10 PM | Report abuse

Go back to 2002, before real estate values pumped everybody's budget.

Funny, on the way up it was revenues that determined budgets. Now it's last year's budget.

They learned to waste more money. Now they can unlearn.

Posted by: Benson | February 9, 2011 9:18 PM | Report abuse

"You should not be attacking public employees because they have pensions. You should be demanding them from your employers"

Pensions do not work well in a modern economy, where people do not stay with one employer for a long period of time. In your first year of employment, a typical 1.5% per year pension has a net-present value of about 5% of your salary. In your 30th year, that same pension might be accruing net-present-value at more than 50% of your salary per year. Not only does this screw anyone who changes jobs, but it also makes older workers much more expensive than younger ones in such systems.

Regardless of their merits, pensions just don't work without job security, which no one has anymore.

Posted by: brickcha | February 9, 2011 11:18 PM | Report abuse

Let's eliminate all federal taxes then bet on which state will crash first ... then second and so on until America becomes like Somalia.

Officially the U.S. unemployment rate is 9% but we know people not collecting unemployment insurance are not counted so with those people along with the underemployed the rate is probably close to 20% ... so what happens when it reaches 25%?

It will probably be good for private prison stocks. Check your portfolio it will be a good option to consider.

2.5 Billion people in China and India will be standing by to pickup the pieces of what's left of the republican economy.

Posted by: knjincvc | February 10, 2011 1:28 AM | Report abuse

Get over pension envy. When total compensation is compared, the private sector out-earns the public sector at every level of required education but one, the least (no education required).

Posted by: Owkrender | February 10, 2011 4:11 PM | Report abuse

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