by Todd Haggerty
Question: In 1842, what state became the first to adopt a balanced budget requirement (answer is at the end of this post)?
Balancing the budget is widely considered to be the foundation of state fiscal practices. Keeping a budget balanced in times of fiscal stress, however, can be an overwhelming challenge for policymakers. What is meant by a balanced budget is not as clear as it may seem intuitively. Even the number of states whose laws require a balanced budget can be disputed, depending on the way the requirements are defined. The NCSL has traditionally reported that 49 states must balance their budgets, with Vermont being the exception. Other authorities add Wyoming and North Dakota as exceptions, and some authorities in Alaska contend that it does not have an explicit requirement for a balanced budget. Two points can be made with certainty, however: Most states have formal balanced budget requirements with some degree of stringency, and state political cultures reinforce the requirements (for more information on balanced budget requirements click here).
The history of state balanced budget requirements is as rich and varied as the provisions themselves. James D. Savage noted in his 1988 book, Balanced Budgets and American Politics, the Panic of 1837 was the spark that pushed states to impose balanced budget requirements. Savage notes that “nineteen states adopted these amendments between 1842 and 1860.”
Whatever the requirement or procedure, for the majority of states, however, the most important factor contributing to balanced budgets is not an enforcement mechanism or a provision specifying how a shortfall will be resolved. Rather, it is the tradition of balancing the budget that has created a forceful political rule to do so. Although states with enforcement provisions emphasize their importance, the expectation that state budgets will be balanced is the most important force in maintaining a balanced budget.
Question: In 1842, what state became the first to adopt a balanced budget requirement?
Answer: Rhode Island
THE GREAT COLORADO PENSION HEIST OF 2010: DIAGNOSIS, “LEGISLATIVE SCHIZOPHRENIA.”
If two contradictory positions peacefully coexist in the mind of an individual that person is schizophrenic, but is it possible for an entire organization to exhibit schizophrenia? Be the judge.
The Colorado General Assembly has recently endorsed the following two public policy positions:
#1 - “Colorado is in a fiscal crisis, Colorado PERA pension contracts must be breached!”
#2 - “Colorado is not in a fiscal crisis, we are free to grant $100 million in property tax relief!”
How is it that this glaring inconsistency is readily apparent to me, but cannot force its way into the minds of our state legislators?
In 2000, Colorado voters amended Article X of the Colorado Constitution to allow the General Assembly, at its discretion, to exempt up to $100,000 of the value of a qualifying senior’s home from property taxation. To qualify for the tax relief, a senior must be 65 years old or older, and must have lived in his/her home for a decade or more. If tax relief is granted by the General Assembly, the state is required to reimburse Colorado local governments for any resulting loss of property tax revenue.
Tax relief under this 2000 constitutional amendment is optional. The General Assembly is not compelled to return state revenues to taxpayers while it is in breach of its contractual pension obligations.
Providing property tax relief may be laudable; however, it is a discretionary allocation of state resources. Meeting one’s contractual and moral obligations (for example, honoring pension contracts that were earned over a thirty year period) is not discretionary.
The General Assembly may be schizophrenic, but it is not ignorant of its pension obligations. Every year Colorado PERA pension administrators hire an actuary to determine the amount of money that must be contributed to the PERA pension in order that it remain financially sound. This figure, (the “annual required contribution”) is routinely provided to the Legislature, and has been routinely ignored by the Legislature. The figure has grown to exceed a cumulative $3 billion.
New heights of absurdity are reached when one learns that the Colorado General Assembly provides funding to pensions that ARE NOT its legal obligation, while simultaneously ignoring pension debts that ARE its legal obligation. Over the last two decades the Colorado General Assembly has pumped more than half a billion dollars into pension obligations that are not its responsibility, those of local governments (old local government fire and police pension obligations). Much of this money was sent to the local government pension plans in years during which the General Assembly ignored its own PERA annual required contributions.
In the coming years, judges may legitimately ask “Why should the state of Colorado be permitted to breach its contractual pension obligations in years that it has provided discretionary tax relief, ignored its annual required contributions, or directed state resources to pension obligations that are not its own?”
How can the Colorado Attorney General argue with a straight face that it is “actuarially necessary” for Colorado to breach its pension contracts, when the state is giving back tax revenue, ignoring its annual required contributions, and voluntarily paying pension obligations for other governmental entities?
While states across the nation are enacting prospective, legal, moral pension reforms, the Colorado Legislature has adopted a retroactive pension reform bill (SB 10-001). While states across the nation are reducing their unfunded pension liabilities (albeit slowly) the Colorado General Assembly is attempting to claw back deferred pension compensation that was earned over the past thirty years.
The Colorado General Assembly distills the political preferences of all Coloradans. Our character is reflected in their actions, by observing the Legislature we know ourselves better.
So, who are we? The verdict is ugly.
Collectively, through our elected representatives, it appears that we will commit fraud when it is financially opportune. We will construct elaborate rationalizations for outright theft. We will abandon our contractual obligations when convenient. We will be distinguished by our moral laxity.
What can you do? Go to the saveperacola.com website, click on the “Support” tab, and send them a contribution. Call or e-mail every PERA member and retiree you know and ask them send support. Call your public employee union representatives and ask them how they can stand idly by while the Colorado Legislature attempts to breach its contracts with public employees. Colleagues of our public sector union officials across the country are aggressively defending the pension rights of their union members. What has happened in Colorado is truly bizarre.
To follow developments in the Colorado pension theft lawsuit sign up as a Friend of Save Pera Cola on Facebook.
Have your friends sign up as Friends of Save Pera Cola. Copy this post and e-mail it to PERA members and retirees you know.
Posted by: Algernon Moncrief | May 03, 2012 at 08:34 AM