Tuesday, April 21, 2015

Why tap into savings at all? Why not cut more instead? ...

As readers of these pages will know, I favor using money from the earnings reserve to fund the deficit projected for the FY 2016 budget, instead of money from the Constitutional Budget Reserve (CBR). The reason is because, under Art. 9, Sec. 17(c) of the Constitution, drawing money from the CBR requires an affirmative vote of three-fourths of the members of each house of the legislature.   That is the reason -- and the only reason -- why the House Majority currently is negotiating with the House Minority over the budget. Going that route clearly will increase spending from those levels previously passed by the House.

Using money from the earnings reserve, on the other hand, is governed by Art. 2, Sec. 14 of the Constitution and only requires an affirmative vote of a majority of the membership of each house.  No negotiations with the Minority -- and thus, no compromises that result in increased spending -- are required to tap this reserve.

Today, some suggested as a third route reducing spending to the levels necessary to avoid tapping either reserve.  ("Why tap into savings at all? Why not cut more instead? ...")

This is a portion of the exchange that resulted.  For those interested, the full discussion, which took various other twists and turns, is available here.


[T]he need to use the CBR gives Tuck and the Democrats power they haven't had in years. ...
Like · Comment ·
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  • David Nees ... if they really want to depower Democrats. They just use earning reserve
    9 hrs · Like · 1
  • Carol Carman I am perplexed... why tap into savings at all? Why not cut more instead? Here is just one example of overspending that does NOT accomplish a single thing (compare test scores with money spent):https://fbexternal-a.akamaihd.net/safe_image.php...
  • ...
  • Andy Sorensen Why not have majority pass scaled down budget w/o CBR. Then propose second budget that requires CBR and let Tuck/Dems pass or not?
    1 hr · Like
  • ...
  • Brad Keithley Carol & Andy ... Spending in the current year will likely end up around $6.2 - 6.3 billion. At that level we will fully deplete the SBR by the end of the current Fiscal Year. The proposed budget level passed by the Senate and House for this coming year is roughly $5.3 - $5.5 billion, a roughly 12% cut from the current year. The amount of oil and other revenues (i.e., before adding investment income) projected in the Spring update for this coming year is roughly $2.2 billion. So, the amount of additional cuts that would need to be made to avoid calling on additional reserves is roughly another $3.3 billion, which in total would require a roughly 68% reduction (cut) from current year spending levels. Put another way, if it shut everything -- and I mean everything -- else down, at that revenue level the state possibly could cover 90% of the levels budgeted for K-12 and Medicaid. Everything else would be completely and totally gone. The threat of doing that, of course, is completely unrealistic and if made, would just prolong this agony further. The realistic choice is to either fund the difference from the CBR or the earnings reserve. The CBR requires a 3/4 vote of each body and, as we are seeing, will cost a lot to achieve. The earnings reserve requires only a majority vote of each body and can be done with agreement between the two majorities without involvement of the minority. Those are the facts ...