Under the Radar: The New Tax and Budget Battleground Is in the States. despite Wrenching Cuts, a Movement to Restore State Government Capacity Has Begun

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THE NEWS FROM WASHINGTON IS FILLED WITH debates about safeguarding Americans' Social Security, proposals to make tax cuts permanent, and sweeping federal budget reductions in a time of looming deficits. In the meantime, the 50 states, various territories, and close to 90,000 counties, cities, towns, and other local jurisdictions struggle with their own concrete budgetary challenges. As critical as current federal-level issues are, those confronting state and local governments may have even more immediate effects on people's lives.

It is state and local governments that sponsor schools, public universities, and community colleges; maintain highways; secure public safety; and administer most courts. They dispatch inspectors to ensure public health and to see that nursing homes and industrial facilities are up to code. They oversee insurance, utilities, and other vital industries. They uphold standards for physicians, dentists, psychologists, engineers, and other professions. They support alcoholism-treatment facilities, adoption agencies, small-business assistance, fish and wildlife management, and other services that form the dense civic infrastructure that makes residence in the United States enviable. Although federal funds often help subsidize state and local activities, virtually all transactions that people normally have with government (except perhaps with the post office and the Internal Revenue Service), are, for better or worse, with state and local governments.

Until recently, state services and functions had been steadily improving in professionalism, sophistication, and uniformity. But the march toward modernization in state public services, taken for granted during much of the postwar era, is under relentless attack by the anti-government, low-tax movement. Promoted by conservative think tanks and led by the American Legislative Exchange Council, like-minded legislators are working to undermine public-sector capacity. Their playbooks call for privatization, deregulation, and, above all, a reduction in government expenditures. The most recent state fiscal crisis has provided ample opportunities.

There have always been tensions between conscientious legislators who support or oppose particular government expenditures, or who advocate or oppose increased tax revenues. But the sly campaign to cut government in general is relatively new. The advocates of small government today do not attack, as such, public schools, the state's flagship university, mental-health providers, child-care assistance, or other critical programs and institutions. Instead, conservatives now undermine government in general. They respond to budget crises with deep spending cuts and sweep away any growth in revenues with tax cuts, ratcheting down the government's ability to address public purposes. Any notion of investing in state capacity to meet growing needs is dismissed, leaving advocates of vital state services to compete with one another for an ever-smaller state budget pie.

As myriad programs are starved to preserve funding for core activities, states are hollowing out planning agencies, deferring maintenance on roads and public buildings, and reducing inspectors in key regulatory areas. They have gutted their public workforces by offering early retirement. Public workers who once helped the unemployed are being replaced with computer kiosks that spit out job listings. They are eliminating key data collection, obscuring from the public the evidence of decline.

Unlike the federal government, nearly all states are required to balance their budgets each year. So when recessions occur and tax collections decline, program reductions follow. Under a rational budgeting process, states would sequester funds in rainy-day accounts during good years and cut taxes only temporarily in anticipation of recession years. But driven by the anti-government ideology of the 1990s, states cut taxes permanently. …