The colossal magnitude of federal red ink rightly generates lots of media ink. But the U.S. government’s debt crisis isn’t the only ominous budgetary issue facing American governments. As a bipartisan group of fiscal experts warns, state governments are also in rising peril of a debt menace.
And as with the federal debt mess, even a more robust economic recovery — assuming we ever get one — wouldn’t solve the states’ structural fiscal problems.
That was the ominous message delivered last week in Washington by State Budget Crisis Task Force co-chairs — former Federal Reserve Chairman Paul Volcker and former New York Lt. Gov. Richard Ravitch.
The report cited numerous obstacles that states will face over the next few decades in meeting their financial obligations. Among them — climbing health care costs, underfunded pensions, long-neglected infrastructure needs, more expected federal budget cuts and declining tax revenue.
That pension-funding concern should sound familiar here in South Carolina, where serious questions have long been raised about the long-term viability of the state workers’ retirement system. Thankfully, the Legislature took action to shore it up in the recent session.
And though our state appears to be in better general fiscal shape than most, just consider the irresponsible deficit in road and bridge repairs.
While the report focused only on six populous states (California, Illinois, New Jersey, New York, Texas and Virginia), their balance-sheet challenges are shared throughout the land.
Yet our soaring federal deficits and national debt understandably dominate the topic of unsustainable government finances.
Adding to the illusion that the states are financially OK is the legal requirement in all of them except Vermont to balance their budgets. After all, the state governments, unlike the national government, can’t print money.
However, as the task force points out, many states have resorted to accounting “gimmicks” and non-recurring revenues to produce falsely reassuring numbers.
Mr. Ravitch cited such sleight of budgetary hand as a driving force behind New York’s 2009 fiscal mess — and a continuing threat to the financial future of not just the Empire State but many others.
As Mr. Volcker put it: “A lot has been going on in various state budgets, not much of it good.”
But at least that task force is doing a public good by sounding the alarm.
There’s no magic wand that can make the states’ budget crises disappear. Just as hard choices are required to restore federal fiscal stability, putting states’ finances in long-term balance demands tough calls.
But as the task force recommends, greater transparency in and access to honest numbers are indispensable tools for this essential task.
And that’s sound advice for legislators in all state capitals — including Columbia.