States don’t have to wait for stimulus payments

February 2, 2009 | By | Reply More

What with the Congress mulling over plans for stimulating the American economy, there is an even more critical role to be played by the states in delivering aid to those hardest hit by our current economic crisis. States are where the tires hit the road, and states can act much more efficiently and quickly to meet the specific demands of their citizens. Even after the states have taken action, Congress can support these actions with direct funding and augment the strained budgets the states face with declining tax revenues in our recessionary economy.

I’ll use an example of my home state of Missouri. We have just elected a Democratic Governor after four years of a GOP Governor who spent his time giving tax breaks and favors to corporations and contributors, leaving the state with a budget shortfall of over $300 million. We have a GOP lead legislature in both chambers of our bicameral legislature. So far, everyone has promised “bi-partisanship” and all are looking at ways to make up the differences in funding because Missouri, like all states, has to have a balanced budget.

Regardless of responsibility for why revenues are down, the Governor apparently will have to cut the budget in the current fiscal year to make ends meet. I say apparently because of that pesky requirement we balance or budget each and every year. So how does a state government fully fund priorities when immediate cash revenues keep that from being done? Here’s how.

If one imagines the budget as a pie, the various spending priorities divvy up the pie and meet the end result of the projected revenues which then form the basis for budget decisions. In the past, there have been stopgap measures to come up with one-time ways to meet budget shortfalls such as securitization of Tobacco Settlement payments, sale of some state assets, etc. Of course, things like the some 100 plus telephone relay towers could be sold, leased back and the revenue put into the kitty or the state could authorize rental of portions of the state’s towers to telecoms for additional revenues, or sale-leaseback of some buildings. The revenue generated by these types of scheme is likely to be minimal. What I propose is a variation of a method used successfully in the past, and which the voters of Missouri overwhelmingly supported.

I assert that the chief functions of any state government are the education of its populace, the provision of healthcare services to its citizens, and economic development. Of course, my priorities can be debated but, for purposes of this proposal I will choose these three as the issues to be addressed.

In the budget pie there are many pieces and the only way I know to expand the current funds available without raising taxes is to expand debt and thereby expand the debt service portion of the pie. Such debt service expansions would necessarily limit what other items might be funded by state dollars in the future but, will guarantee essential matters are addressed in the long term. It will also be essential that these priorities not able to be tinkered with by legislative caprice. I propose that such expansions be done by direct votes of the people of the State of Missouri.

During the term of the late Governor Mel Carnahan, a proposed constitutional amendment to increase Missouri’s bond authority for use as educational funding by some $600 million received overwhelming support from the voters of Missouri. I propose that a series of such constitutional amendments be submitted to the voters to fund education, healthcare and economic development in Missouri.

Educational funding has been a source of consternation, confusion and litigation in Missouri for many years. Missouri’s Constitutional reasonably recognizes education as a top priority for state government and mandates educational spending at certain levels and also for the provision for grades 1-12, and also for post-secondary education. Kindergarten, which was invented in Missouri before it became a state, is not mandated by our current constitution. Monies are allocated among the school districts using a “foundation formula” which at present discriminates against urban school funding and favors rural districts in the provision of state aid.

We need to determine what levels of dollars are necessary to fully fund a fair foundation formula for education for all Missourians for some determinate future period of time.

In revising the foundation formula, there needs to be taken into account the current disparities in funding, a method of equalization of the burdens of funding and a stabilization plan to phase in an equal distribution of the costs between urban and rural taxpayers, such as certificates of worth or other methods to have rural property values more fairly appraised.

The appraisals done in the urban areas are revised every two years using systems, which are arguable flawed, but which actually have some direct relationship to the real values of properties were they to be sold in the market and a far greater accuracy in value compared to the lesser values applied to other real property in the rural areas of Missouri (hence the disparities). In fact the tax revenues from the urban areas subsidize rural educational budgets, and have arguably done so for several decades.

After the formula is “fixed,” there needs next to be a vote on two constitutional amendments: one to set the formula in stone, which cannot be changed without another vote of the people, and; another to set the amount of the funding to be financed by bonds with the debt service then to become a fixed part of the annual budget thereafter.

The healthcare issue may be addressed in a similar fashion as education: with two constitutional amendments for a vote of the people; the first establishing healthcare as a human right under the state constitution and what such right shall entitle Missouri citizens, and; the second to fund such care on a sound actuarial basis for all Missouri citizens for some determinate future period of time. Insurance coverage would then be available by bidding of insurers and also may be purchased for treatments or other items not covered by the state mandated single-payer plan as approved by voters.

Economic development may be described as a function of supportive infrastructures in a given area. A better educated and healthier population will contribute to a sound supportive economic infrastructure. To the degree other financial incentives may be necessary to retaining present businesses and assuring the location of new businesses in a state, another bond issue for economic development should be put to a vote of the people. California did this with a $10 billion investment in life sciences research, we need to look at what was done there and see what worked and build upon it.

To some, it may seem unduly burdensome to take these issues directly to a vote by the people of the state. I say that since these priorities are to so take up our tax dollars in future debt service that the best way of establishing these priorities is by a vote. Thereafter, such priorities established by the voters may only be changed by another vote. A vigorous debate before a vote will allow us all to more fully understand our commitments to our children, their education and our health, and to the future development of our state.  In the debate, we will also be setting a precedent for all America to educate well, take care of our own and justly plan for the future prosperity of ourselves and our children.

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Category: Economy, Education, Politics

About the Author ()

imothy E. Hogan is a trial attorney, a husband, a father of two awesome children and a practicing Roman Catholic in St. Louis, Missouri. Mr. Hogan has done legal and political work in Jefferson City, Missouri for partisan and non-partisan social change, environmental and consumer protection groups. Mr. Hogan has also worked for consumer advocate Ralph Nader in Washington, DC and the members of the trial bar in the State of New York. Mr. Hogan’s current interests involve remaining a full time solo practitioner pioneer on the frontiers of justice in America, a good husband and a good father to his awesome children.

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