Three budget bills containing the governor’s proposals – LBs 813, 814 and 818 – will be heard this afternoon by the Appropriations Committee, where OpenSky Policy Institute’s testimony will focus on the package’s sustainability.

Structural Deficit

Our first concern is a structural imbalance between how much the state is taking in and how much it’s spending in the future, which means it could create a structural deficit. This calls into question the long-term sustainability of this proposal. The proposal clearly leverages the state’s current boom from federal pandemic funding and we’re concerned the governor’s plan wouldn’t allow the state to manage its finances sustainably. 

There are major tax and spending items in the governor’s proposal. Using a temporary revenue windfall to fund permanent obligations could require the state to rely on the cash reserve to fund the state’s other equally important services. The cash reserve, however, may not be a reliable source of funds for long, as this budget includes items that will diminish the state’s ability to raise revenue and thus replenish the reserve.

Not Much For the Floor

In addition, the amount of money left for the floor – meaning for other legislative priorities beyond the governor’s – in this proposal is limited relative to the size of the state’s budget surplus. The Legislature will have $218 million – about 11% of the general fund surplus – for the floor while the remaining 89% is set aside for other items like tax cuts and the governor’s proposed Education Future Fund. While OpenSky has long supported increased funding for public education, we’re nonetheless concerned about the sustainability of this investment given the lack of a dedicated revenue source and the simultaneous tax cuts being proposed. There are a number of other proposals out there that also reflect important state priorities and that total well beyond $218 million. Very few would be able to receive funding under the governor’s budget. 

Will That Be Spent?

While the proposed budget leaves just $218 million for the floor, it also assumes that amount goes unspent, as it’s carried forward along with what’s called the minimum reserve, or a set amount of funds that must be carried over year over year. This concerns us as it indicates that the budget proposal consumes our current robust fiscal situation and leaves no room for anything else.