Budget Gimmicks: "The Good, The Bad, and The Ugly" (2001)
By Ann Kempski
When revenue starts to dry up and spending pressures grow, politicians do everything they can to avoid raising taxes. The options listed below might not be found in a book on good budget practices, but they may have to be taken into account before politicians will consider new taxes. By the end of 2001, Citizens for Tax Justice will release a new edition of Who Pays, which looks at the burden of state and local taxes in every state. It will be a valuable resource for AFSCME as we promote progressive state tax reform in the next two years.
"The Good" (Depending on Your Point of View)
- Postpone capital spending
- Take advantage of low interest rates and borrow for capital projects
- Refinance existing debt at lower rates and/or longer terms
- Tap “rainy day funds” or other reserve accounts
- If your state has a tax expenditure budget (Ohio, Minnesota, Oregon and some others do), look through it and identify some easy exemptions or credits to eliminate
- Look for easy tax loopholes to close, such as special treatment of partnerships or "S corporations"
- Enact new or higher user fees or permit fees (if they don’t fall heavily on low-income people)
- Create a temporary "tax amnesty"
- Join a multi-state "powerball" lottery, if your state hasn’t already
- Abolish funded, vacant positions
- Use unspent Federal TANF funds in creative ways to assist low-income families
- Find ways to maximize Medicaid revenues to your state
- Find ways to transfer unspent balances in dedicated funds to the general fund
- Sell or lease unused state/local property or other assets
"The Bad" (To Be Avoided)
- Cut or delay payments to local governments or school districts
- Lay off workers
- Privatize services
- Raise employee contributions for health insurance or other benefits
- Deny or cut benefits to needy families
- Cut back on important services
"The Ugly" (Never Say Never)
- Delay payments to vendors
- Freeze hiring
- Tap tobacco settlement funds or borrow against future tobacco settlement payments
- Delay contributions to pension funds
- Rely on a overly optimistic revenue forecast
- Become more dependent on revenues generated from state-sponsored gambling
- Furlough employees temporarily to avoid layoffs
- Postpone negotiated wage increases
- Sell property or other assets and "lease it back"
In addition to these budget gimmicks, many employers are looking at layoffs or other ways to cut payroll costs. See this issue’s cover story for more information on that development.
For more information on budget gimmicks, contact the Research Department.