Every year, at least one U.S. state gets to July 1 without agreeing on a budget that was due June 30. This year, it is worse. More than ten states are having problems. Unlike the federal government, states have constraints that force budgets to be relatively balanced, and that is especially difficult to do in a year when tax revenues from employment, retail sales, and real estate are falling, while the need for social services is higher than before because of the large number of unemployed workers.
There are no simple answers. It is not easy for a state to borrow money from a Wall Street that is suddenly skeptical of government’s ability to repay. Income or sales tax increases take a bite out of the state’s economy, but then so do cuts in basic services.
In Pennsylvania, where I live, the lack of a budget means the state can’t pay all of its workers. Legislative paychecks weren’t distributed yesterday, and if a budget agreement is not reached this month, very few paychecks will be going out. No one really expects a budget before August, so a lot of things aren’t going to working quite right in Harrisburg this month.
California is the biggest state without a budget, and it has started sending letters to retirees, college students, suppliers, and others, in place of the checks it should be sending. The letters promise the payments will be made in the future, but no one can say when that will occur. Among other ideas, California is considering closing most or all of its state parks, but this is not as simple as it sounds either. The federal government has cautioned that six of the parks are on land supplied by the federal government, and it could take that land back if the parks are closed down.
A state without a budget might as well be called a state of indecision. It is like a person who does not want to get out of bed in the morning, because what if that leads you to take a wrong turn and end up somewhere unexpected? Of course, deciding to finally go do something is more complicated when there are a million people involved, but the losses from inaction are just as real for the state as they are for the individual.