Lincoln Blog

December 01, 2008:

Predictably, calls are starting to rise from beneath the capitol dome for tapping into the state's $750 million "Rainy Day Fund" to help plug what could end up being a $3 billion budget deficit by the time the current fiscal year ends on June 30, 2009.

That would be a mistake.

All signs point to an extended economic downturn. It is reasonable, or at least prudent, to project that revenue for fiscal year 2009 - 2010 will be off significantly more than collections for the current year. Who knows what the year after might bring? In other words, we should plan for a long rainy spell.

It would, therefore, be folly to drain the "Rainy Day Fund" to balance the current fiscal year's budget. It is especially folly in that the current budget was passed amid warnings that it was unrealistic. Further, for at least the second year in a row, lawmakers dramatically increased spending while holding tax rates steady. That scenario required an expanding economy to work. Unfortunately, the exact opposite has occurred.

It is axiomatic that the absolute worst time to raise taxes is during a period of economic contraction. Higher tax rates would only make a bad situation even worse. Therefore, the only prudent course of action is for the state to cut spending - and to do so in a dramatic way.
The frills have to go, even those cleverly marketed as "economic development." State spending must be pared back to fund only those core government services - and even those areas are going to have to tighten their belts.

The belt tightening should commence forthwith. There are still seven months left in the current fiscal year. That is plenty of time to rein in spending and balance the budget without resorting to a raid on the "Rainy Day Fund."

Then, as the administration and lawmakers begin the process of crafting the 2009-2010 budget, we should spend within our means - and that means no new taxes, and no tapping of the "Rainy Day Fund" at least until we get a clearer picture of how deep this recession is likely to go.

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