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Budget A Done Deal...

By Vernon Billy - September 19, 2008

After several days of high political drama around a potential veto of the state budget, state leaders now appear to have reached a budget agreement that will bring this record-setting budget battle to a close…at least for now.

On Wednesday and Thursday, legislative leaders met with the Governor in order to resolve his concerns surrounding the provisions in the Rainy Day fund included in the budget as well as the proposal to accelerate tax receipt collections.

The legislature is expected to vote on the budget sometime Friday – 81 days into the fiscal year.

The agreement is reported to include the following changes to the budget approved by the legislature earlier in the week:

  • Further limits when “rainy day” funds may be accessed.
  • Eliminates the proposal to “accelerate” the collection of tax receipts by increasing personal income tax withholding by 10 percent and then returning the over-collections to tax filers later in the year. This budget gimmick would have generated approximately $1.6 billion in earlier payments.
  • Increases penalties from 10 percent to 20 percent on corporations that underpay taxes.  This is intended to make up the lost revenue from the elimination of the accelerated tax collection provision.
  • Reduces the state's reserve fund from $1.2 billion to $800 million.
  • Cancels the proposed tax amnesty program.

While the legislative leaders and the Governor have reached a deal on the budget, it appears that the state may have to hold a special election in order to get two budget-related initiatives before voters. 

One of the measures would give the legislature more control over after-school programs funded through the Governor’s 2002 after school initiative, while the other measure would alter the state Lottery.   

Secretary of State Debra Bowen is reported to have stated that the chances of getting the legislature’s two budget proposals designed, printed and mailed to voters before the November election are very low.

We’ll see. Several of Bowen’s predecessors as secretary of state have made similar claims in the past when asked by the legislature to place last minute legislative initiatives on the ballot.  In most cases, the secretary of state eventually found a way to include such measures on the ballot.

The conclusion of the budget battle brings a sigh of relief for some, and outrage by others.  But no matter how one feels about this budget, it is widely acknowledged that this budget is a “house of cards” that does not solve the underlying budget problem – the structural deficit. Instead, the new budget ensures the state’s fiscal problems will resurface in January, if not sooner.

Editor's Note: Vernon Billy  is a managing partner of Education Media Group, LLC and is president of Governmental Solutions Group, LLC, a policy consulting and legislative advocacy firm.