Dem Furloughs, GOP Opportunity
Fiscal year 2010 is off to a rocky start for a number of state governments that are just beginning to face the cold hard facts of being broke. Legislatures in 19 states are engaging in a witches brew of government worker layoffs and furloughs, higher agency fees, reduced agency resources, and higher taxes in order to meet budget shortfalls that exceed $1 billion, and in the more extreme cases $5 billion.
Residents in New York will face a few surprises on their next trip to the Department of Motor Vehicles, including higher license renewal fees and mandatory license plate renewal fees. Drivers in California won't be able to renew their licenses at all on Fridays because the DMV will be closed. Residents seeking the aid of any of a number of state agencies across the country will face longer waits due to fewer workers behind the counter. Those people lucky enough to get attention at all are likely to find it costing more than it did previously. Income, sales, and excise taxes are also on the rise.
It is difficult to predict what the future holds for those states teetering on the brink of destitution, but the tactics they are using to keep themselves out of hock are not widely embraced by economists. Furloughs are often seen as more of a political move than a substantive cost-cutting measure, and higher taxes have a way of actually shrinking government revenue and driving away business.
There will be a world of hurt at the ballot box in 2009 and 2010 if these measures fall short. There are gubernatorial and statewide office elections in a large majority of the 19 states that are enacting layoffs, furloughs, and tax and fee hikes. Republicans enjoy unified control of the governorship and the statehouse in only two of those states. Democrats hold control of either one or both branches in the remaining 17, meaning they have the most to either lose or gain in this fiscal gamble.