Georgia State Research Partnership Brings Clarity to State Budgeting Practices
By Alex Hathaway, Researcher, Center for State and Local Finance
On July 6, the state of Illinois finally enacted a bipartisan balanced budget – 736 days after it was due.
But the damage has been done. According to the state comptroller, Illinois has unpaid bills in excess of $15 billion, and Bloomberg L.P. shows it owed $194.7 billion in unfunded pension liabilities and retiree health care obligations as of 2016.
The fiscally imprudent standoff has played out in the media with blame for the governor, the legislature and municipal unions. Although the state managed to stave off a junk bond rating from Moody’s in July, its general obligation bond rating sits only one notch above that.
It’s a wake-up call, or should be, for governors and policymakers across the United States. What other states may experience as small strains by comparison are still indicative of lagging fiscal health and governmental accountability, and everyone has room for improvement.
Left unchecked, these state budget problems erode public trust.
This is the cornerstone of the research Georgia State University’s Center for State and Local Finance (CSLF) is conducting with the Volcker Alliance. The multiyear study, Truth and Integrity in Government Finance, seeks to improve budgeting practices and fiscal sustainability in all 50 states.
Twelve colleges and universities are participating, with Georgia State as the lead institution in the Southeast. In a 29-question survey, graduate students and faculty are delving into forecasting and budgeting practices, one-time revenue uses and transparency issues.
Some preliminary national findings from fiscal year 2016 show:
- About two-thirds of the states failed to make contributions to public employee pension systems that the plans’ actuaries deemed necessary.
- About 20 percent of states filled budget gaps with proceeds of asset sales, upfront payments on financing and other financial transactions.
- Other one-time revenue sources are also common: Five states borrowed to funds to close budget deficits, 11 shifted current costs to future years and 30 moved special funds into the general fund.
- Only 20 states publish multiyear revenue estimates, and just 20 disclose multiyear expenditure forecasts.
- Four states lack consolidated budget websites, and only two fully disclosed the cost of deferred infrastructure maintenance.
In phase one (2016-17) of the project, Georgia State’s researchers studied the budgeting practices of Georgia, North Carolina, South Carolina, Maryland and Virginia for fiscal years 2015-17. Earlier this year, CSLF presented its findings, including one on fiscal disclosures and another on revenue forecasting.
In the summer, the Volcker Alliance extended its work with CSLF, and Georgia State will study the same five states and three additional ones, finishing the fiscal year 2017 analysis and beginning the fiscal year 2018 study with available data.
CSLF also will conduct two national training sessions on state budgeting practices and debt. The sessions are intended for graduate students across the nation participating in the Volcker Alliance project. Trainings documents, research protocols and tips will also be provided by CSLF.
On Sept. 28, CSLF researchers are scheduled to present results from their ongoing work at the Association for Budgeting and Financial Management national conference. The final Volcker Alliance analysis will be released on Nov. 2 in New York City.
Alex Hathaway, who began the Volcker Alliance project as a graduate student, is a researcher at the Center for State and Local Finance in the Andrew Young School of Policy Studies at Georgia State University.