The Return of State Surpluses Could Point to More Growth to Come

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This is from The Daily Beast.

Maybe the rest of the nation should follow the example set

the state of Texas.

My home state of Indian is not doing bad budget wise.

Hey Barack this is how to grow the nation’s economy.

This spring, budget surpluses are blossoming across America. We’ve noted that the combination of employment growth and tax increases is boosting federal revenues significantly—13 percent in the first five months of the current fiscal year. Combined with a bit of fiscal discipline, the higher revenues are helping to reduce the (still massive) federal budget deficit.

Matthew Borkoski/Getty

But America’s 50 states aren’t permitted to run deficits. So each year, state legislatures pass, and governors sign, budgets for the next fiscal year in which expenditure are supposed to align with expected revenues. Then, they wait and hope that the revenues actually materialize.

That’s happening—and more. In the current fiscal year (fiscal 2013, which started last spring or summer in most states), the level of spending rose just 2.2 percent from fiscal 2012, according to the National Association of State Budget Officers (NASBO). That’s far below the historical average of 5.6 percent growth per year. But state revenues are growing more rapidly than spending. In the fourth quarter of 2012, according to the Nelson A. Rockefeller Institute of Government, state tax receipts were up 5.7 percent from the fourth quarter of 2011. For the full year, revenues probably rose about 4 percent. Now, late 2012 tax receipts were boosted in part because so many companies rushed dividend payments out the door to avoid the prospect of higher taxes.

Still, with revenues rising more rapidly than spending, deficits are evaporating in state capitals. “It’s likely most states will end the year with a slight surplus,” said Brian Sigritz, director of state fiscal studies at NASBO.

Surpluses are showing up in places you’d expect. North Dakota, currently enjoying an energy and agricultural boom, is projecting a $1.6 billion surplus over its two-year budgeting cycle. Texas, another resource-rich state, foresees an $8.8 billion surplus over its current two-year budget cycle.

But the Rust Belt is also regaining some of its fiscal shine. Ohio is expecting a $1 billion surplus for the current fiscal year. Wisconsin is looking at $484 million in black ink. Other states with surpluses include Iowa ($800 million) and Tennessee ($580 million). West Virginia completed its 2011–12 fiscal year with a surplus of about $88 million.

Some of the coastal states whose finances were hit hardest by collapsing housing markets and persistently high unemployment are also making a comeback. For the past several years, California’s massive, recurring deficits have made life miserable for politicians and inspired comparisons to Greece. Thanks to tough spending cuts, higher taxes, and a general recovery, California’s finances are on the mend. “California expects to take in $2.4 billion more in revenue than it will spend this fiscal year, which ends June 30,” Tami Luhby of CNN Money reported. “After paying off a shortfall from last year and setting aside funds for upcoming obligations, it’s on track to end the year with a $36 million surplus.” Florida, another state that has had to deal with harsh cuts to rein in deficits, is also now in the black. The current projection is for a surplus of $437 million.

Now, this doesn’t mean the state and local financial problems are over. States in New England and the Northeast ravaged by slow growth and weather-related destruction—New York, New Jersey, Connecticut—must still cut their way to balance. In real terms—i.e., adjusted for inflation—state revenues are still below the their pre-recession peak, notes Liz McNichol, an analyst at the Center for Budget and Policy Priorities. Most states have long-term problems with underfunded pensions. Cities, which have far less flexibility in raising revenues, continue to suffer. On Monday, Stockton, California, declared a rare Chapter 9 bankruptcy.

But in states with surpluses, life is becoming more fun for governors. Governors like John Kasich (Ohio), Mike Pence (Indiana), and Terry Branstad (Iowa) are pushing for tax cuts. Others are essentially pocketing the cash, stowing it in rainy-day funds or using it to cope with higher spending requirements. Tennessee is looking to use cash to spend more on health care and its prison system. Florida Gov. Rick Scott, up for reelection in 2014, is seeking to raise pay for teachers. Looking ahead to fiscal 2014, which starts for most states later this year, NASBO says almost every state is projecting a spending increase, and up to a dozen are cutting income taxes. (Here’s a state-by-state summary of next year’s budgets.)

Analysts are holding out hope that the return of surpluses will help reverse one of the most devastating results of the last several years. Governors and legislatures have frequently sought to balance their budgets by firing employees—including teachers and police officers. Since January 2009, state and local governments have reduced employment by 746,000—or about 4 percent. It’s likely that some of the increased tax revenues will be used to recall laid-off employees.

Sustained growth is the miracle cure for deficits. And when it comes to state finances, surpluses can help spur further growth.



Republicans consider ending Iowa straw poll, in post election reset

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This is from Fox News Politics.

It is not only time to reform Iowa but New Hampshire.

There many things that need fixed with the primary system.

The GOP needs to take a hard look at the complete process.


DES MOINES, Iowa –  In the days since Republicans lost an election many in the party thought was theirs, chatter has been bubbling about what the GOP should do to recover.

For Iowa Gov. Terry Branstad, it starts with the smallest of actions: abandoning the state’s now-infamous straw poll.

Once a festive checkpoint on the road to the leadoff Iowa caucuses, the poll has devolved into a full-blown sideshow, Branstad and other critics contend. They say it’s an unfair and false test that has felled good candidates and kept others from competing in the state.

“It’s just something that’s gotten totally out of control,” said veteran GOP presidential campaign consultant Charlie Black. “It’s been bad for years, but no one has had the guts to say it until now.”

The poll, which morphed over the decades into a closely watched early test of caucus campaign strength, had “outlived its usefulness,” Branstad told The Wall Street Journal this week. Some activists contend it amplifies the voices of candidates lacking broad appeal.

Branstad says he has widespread support for a different event to replace the poll, held in Ames the summer before every contested presidential caucus since 1979. It has become a lavish affair where campaigns spend heavily to wine, dine, entertain and chauffeur their supporters by bus to the Iowa State University campus.

Critics have increasingly called it a shakedown. Not only do campaigns buy up thousands of tickets for their supporters to attend the event, they bid thousands of dollars for prime spots to pitch tents near the voting area on the college campus.

It’s all to show early support in Iowa, where the precinct caucuses traditionally lead off the early-state nominating march, even though only a fraction of caucusgoers turn out for the straw poll.

“It’s a tedious effort. It costs a lot of money. It’s totally irrelevant at the end of the day. It used to be a test of organization,” said Ed Rollins, who managed Minnesota Rep. Michele Bachmann’s presidential campaign at the time she won the 2012 straw poll. “Today it’s a lot of effort and a lot of energy that really is not worth the effort.”

Bachmann spent $2 million on the August straw poll and edged Texas Rep. Ron Paul with heavy support from religious conservatives.

“The straw poll doesn’t provide a complete cross-section of the caucus-going electorate,” said Phil Musser, an adviser to former Minnesota Gov. Tim Pawlenty.

Pawlenty pinned his hopes on a strong finish in Ames last year but dropped out of the race for the GOP nomination after finishing third, never reaching the caucuses in his neighboring state.

Only about 17,000 turned out for the straw poll, one-seventh the size of the roughly 120,000 who voted on caucus night in January.

John McCain, the GOP’s nominee in 2008, and onetime favorite Rudy Giuliani opted not to compete for the straw poll, turned off by the event’s heavy influence by Christian conservatives. They ran scaled down caucus campaigns as a result.

Romney did not compete in the 2011 straw poll, choosing to project himself as a national candidate who didn’t need to define himself among the Iowa GOP’s rank and file.

But in 2007, Romney spent millions and won, only to struggle to a second-place caucus finish. A month later, he quit the race.

During that campaign, the former Massachusetts governor was so struck by the ferocity of opposition by Iowa Republican activists to illegal immigration that he tacked to the right to distinguish himself from Giuliani and McCain, who supported relaxed sanctions for illegal immigrants.

Doug Gross, a leading Iowa Republican who chaired Romney’s 2008 Iowa campaign, said Romney’s strong opposition to any pathway to citizenship or tuition benefits for illegal immigrants hurt him in the general election four years later against Obama, partly due to his effort to appeal to Iowa conservatives at the straw poll.

The straw poll “forces them to deal with extremists and you can’t help but have some of that rub off on you,” Gross said. “That hurts our ability to nominate candidates who can win.”

Advocates of the straw poll argue the money helps finance the caucuses, which are party-run, not state-run, elections.

Instead, Branstad’s allies are urging the party to substitute the straw poll with a summer fundraiser, without a vote.

Without the straw poll, the caucuses may lure back all top-tier Republican contenders, Branstad’s supporters say. That would raise the stakes for the caucuses by making them truly the first event to winnow the field.

“(The straw poll) was great in its time,” said Iowa GOP strategist John Stineman. “It’s time to move on.”

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GOP governors differ on Obama change to welfare

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This is from Fox News Politics.

The GOP Governors need to stand strong and unite against this plan.

They must fight this illegal move by this rouge administration.

Republican governors differed Sunday on the Obama administration’s announcement to allow states more flexibility on the work requirement for welfare.

Iowa Gov. Terry Branstad lashed out at the plan, suggesting the administration has exceeded its authority, while Florida Gov. Rick Scott suggested the flexibility would allow him to keep the work requirement.

“This is a huge step in the wrong direction,” Branstad said on Fox News Sunday. “I think it’s illegal.”

The Department of Health and Human Services told states Thursday that they may seek a waiver for the program’s strict work requirements.

Scott made clear that Floridians seeking benefits will still have to look for a job.

“People need to be going out and looking for a job,” he said. “We believe in personal responsibility, and we’re going to have that in our state.”

Following the policy directive Thursday, Mitt Romney and other Republicans accused the administration of unilaterally gutting welfare reform, thus overhauling one of the most important bipartisan agreements of the past several decades.

How the change will play out is unclear. The directive said only that states may seek a waiver from the work component of the Temporary Assistance for Needy Families Program to “test alternative and innovative strategies, policies and procedures that are designed to improve employment outcomes for needy families.”

HHS stressed that any alternative should still aim to get welfare recipients into gainful employment. Any plan that “appears substantially likely to reduce access to assistance or employment for needy families,” will not be approved, the memo stated.

States currently must have 50 percent of their caseload meet certain work participation requirements, though there are ways around that as many states fall short.

The hard-fought welfare reform agreement in 1996 was struck between the Bill Clinton administration and a Republican-led Congress. It is still considered a signature legislative achievement from that period.
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