The COVID-19 pandemic will lower the state government’s revenue and increase demands for its services for the current fiscal year and likely for the next one as well. Lawmakers’ priorities should have changed from when they set budgets last October and December. How they reset fiscal policy is far from certain, given how much legislators and the governor have clashed over fiscal priorities.
Budget negotiations are private. It’s up to elected representatives to come together to determine state spending, and that is done behind closed doors.
So I spoke with Talmadge Heflin of the Texas Public Policy Foundation about his experience in these negotiations. He was chairman of the Texas House appropriations committee during a budget crisis of 2003, when lawmakers were able to cut $10 billion in biennial state spending.
While there was a lot of work done to reduce expenses that much, he said, the important thing was that the governor and the Legislature were aligned at the beginning in what they wanted to do. They were going to cut the budget instead of raise taxes or go into debt.
They were able to set targets for different agencies and work with department heads to stretch dollars further. This meant that they did not have to make across-the-board reductions, although they did have an overall target.
Legislators in the majority party made sure to let people in the minority have a say over the budget, too, especially where budget decisions directly affected their districts. They likely had the votes to act without bipartisanship, but the approach they took also won bipartisan votes for the budget’s final approval.
But getting lawmakers centered around the same goal isn’t going to be a given in Michigan right now. Last year, the budget was a point of contention between the Republican-majority Legislature and the Democratic governor. The governor wanted to raise taxes to increase funding for roads and other spending areas like schools and Medicaid. Republican legislators wanted to rely on the state’s growing revenues to increase road funding.
They butted heads until the next fiscal year started, and in the end, neither side got what they wanted. There was less road funding and no tax increase. There was no alignment around what should be done, so there wasn’t much room to compromise.
Lawmakers might not revisit this kind of fighting anytime soon, however. They seem to be taking this pandemic seriously and want to work together through it. There is a lot of uncertainty about what will happen, and there will be conflict about the governor’s emergency powers. The opposing agendas from the previous year, however, may be gone.
If that’s true, then they can quickly rebudget to new pandemic priorities while trimming expenses and stretching remaining dollars further. If they don’t, it’s uncertain what will happen. When there is a lack of consensus about what to do in the face of the state overspending its revenues, budgets go to the last minute, lawmakers look for gimmicks to avoid consequences, debt becomes tempting and tax hikes sometimes occur.
It’s not a given that cutting the budget will be their shared goal this time around. Some legislators may want to raise taxes. Others will seek to borrow money through the pandemic period. All of them should work through those differences and do their best to abstain from placing further burdens on the state’s already strained residents.
There’s a lot of room to cut in the budget if there is a will among lawmakers to do it. And as the former legislator from Texas pointed out, getting that shared will make all the difference.
