Creative Budgeting Government Style; A Statehouse Up for Sale?

A few years ago, some Hoosiers raised an eyebrow when Gov. Daniels successfully proposed the lease of the toll road in northern Indiana to boost the state coffers. Yet, it pales today to the bold (or desperate) actions some states are attempting and taking due to dire financial straits – the likes of which they have never seen.

Hands down, the “winner,” if you will, with the most outlandish gimmick to come up with quick cash is Arizona. The state is seriously considering SELLING its Capitol building and other state properties for $735 million and then leasing them back for $60 million a year.

It doesn’t take a genius to figure out the problems with this. Sure, it’s a major short-term windfall, but the state is only adding to its debt with the building lease. And what if Arizona can’t come up with its rent money? Will the governor and Legislature have to relocate to less fancy digs – say, a Phoenix strip mall?

The motive is sheer desperation. While California has the title of most beleaguered state budget in terms of actual dollars in debt, no state tops Arizona for percentage of budget shortfall (30% of a more than $10 billion budget). Arizona has also started borrowing from Bank of America to help pay the state’s bills and staggering $3 billion shortfall.

(Learning all this almost makes me want to hear Jim Nabors’ sing “Back Home Again in Indiana” and commit to eating a unique fried food at our state fair next year!)

While Arizona’s possible money “solution” comes from left field, there are plenty more commonplace practices – some legitimate, some a bit sketchy – that states take that can bite them and taxpayers in the end. 

California has tried myriad creative accounting maneuvers to try to make a dent in its nearly $60 billion black hole:  from borrowing from special accounts and local government property taxes to adding to payroll withholdings.  The state also pushed the last month of payroll (June) into the first month (July) of the next fiscal year.  This trick is akin to what used to be a regular occurrence in Indiana: the delaying of local government payments month after month (which ceased with the Daniels administration).

Meanwhile, Illinois legislators recently decided the state should simply not pay its $3.8 billion in bills until the next fiscal year.  Just like when a personal credit card is paid late, there is a price to pay.  For Illinois, that means its vendors may charge up to a 5% penalty.  Now, that’s a late fee that will hurt!

Bottom line: States’ budget quick fixes often come with consequences – steep ones.  Indiana, fortunately, is in better fiscal shape than nearly all others. I guess that’s another thing to be thankful for this Thanksgiving.