Senate budget plan is more sustainable

How big a problem will this year’s budget leave for next year? That is a critical question for conference committee members to evaluate in resolving differences between the Senate’s budget plan and the House of Delegates’ version.

The House Appropriations and Ways and Means committees have provided 37 pages of description and analysis to back up their budget recommendations. But nowhere do they estimate the effects of this year’s budget on next year’s finances.

We have done some back of the envelope estimating at MBTPI. If the Senate plan takes effect, we think revenues will be about $50 million short of meeting projected expenditures. That’s not ideal, but it’s well within the range of normal budgetary adjustments.

The House version, though, provides less revenue and a smaller year-end balance. The result: a $200 million shortfall for the legislature to resolve this time next year. In order to bridge that gap, the state will either need to revisit its options for new taxes, or make more cuts to education, healthcare, public safety and community services.

Also, the Senate plan leaves a much larger cushion in the state’s general fund for June 2013 – meaning there’s less risk of precipitous mid-year cuts in the event of a revenue drop caused by a worsening of the fragile economy or federal budget cuts.

The Senate tax plan does affect most households in the state, but it calls for a pretty moderate contribution. For families in the middle of the middle class (around $55,000 in income) it’s less than a dollar a week. For those at the upper reaches of the income range, it’s still less than one fifth of one percent of their income.

It’s better to provide adequate, responsible and sustainable revenues now. The conference committee should support a revenue plan that’s closer to the Senate version.