Budget surpluses spur tension in some GOP states

By David A. Lieb

Associated Press

Published: Monday, May 13 2013 12:23 p.m. MDT

Michigan Gov. Rick Snyder visits Innocademy Charter School in Zeeland, Mich. Wednesday, May 8, 2013.

Robert Mathews, Associated Press

Enlarge photo»

JEFFERSON CITY, Mo. — Turns out that cutting was the easy part. Now Republicans who control a majority of the state capitols in the United States face a far greater philosophical dilemma — what to do with all the money in places where an improving economy has suddenly created a surplus in revenues?

Save it? Refund it though tax cuts? Or spend it?

Though they won majorities in more than half the statehouses on principled platforms of making government smaller, some Republicans now are feeling tremendous pressure to spend newfound money on roads, buildings and schools that had been neglected or cut during the recession-induced downturn of recent years.

"Everybody wants that money," said North Dakota Senate Majority Leader Rich Wardner, where an oil industry boom has fueled one of the largest per capita budget surpluses in the nation.

Only a few states still face budget difficulties several years after the Great Recession forced widespread cuts to public education and social services, according to a new report by the National Conference of State Legislatures. To the contrary, a growing number anticipate that they will finish the 2013 fiscal year with surpluses, some totaling hundreds of millions of dollars.

That has created new tensions in places such as Michigan, Missouri and Texas, where GOP majorities are wrestling with the morality of spending money.

"I like to save money, I like to keep it in the bank, I like to give it back to the taxpayers," said Missouri House Budget Committee Chairman Rick Stream, a self-described fiscal conservative from suburban St. Louis. "But sometimes, you also have to spend money on big capital improvements to move the state forward."

Tax revenues that are running more than 11 percent above last year have given Missouri's largest Republican majority since the Civil War a budget surplus that they estimate at more than $400 million. As recently as a few weeks ago, Stream adamantly opposed spending much of that money. But he now has agreed to use about $120 million to construct an office building in Jefferson City, make repairs to the Capitol and state parks and draw up designs for a new mental hospital. Through such spending now, he said, the state will "save a lot of money down the road."

How states choose to handle their surplus revenues will provide a good first test of whether Republicans can make the cuts they enacted during tough times stick during better times, or whether government will return to its pre-recession levels. Those decisions could depend on whether lawmakers view the financial influx as lasting.

A recent Rockefeller Institute of Government report warned that the surge may be blip caused by wealthy taxpayers taking profits in 2012 to avoid getting hit by a federal tax hike in 2013.

The save-verses-spend conflicts are mounting in a number of states.

Michigan Gov. Rick Snyder — a Republican who is a former accountant — is pushing to sock away more money in a state savings account that already is at its healthiest level in about a dozen years. But some in the Republican-led Senate have other GOP-friendly uses for the money.

Although Snyder recently staved off a plan for more emergency dredging in Great Lakes harbors, other GOP lawmakers would like more tax incentives for the film industry or to avoid hunting and fishing fee increases.

A revenue surge also has stirred turmoil among Texas Republicans, who are especially zealous about small government. After previously cutting $15 billion from the state budget, lawmakers convened in 2013 to learn they had $8.8 billion more in revenues than projected.

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