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Stimulus = State Budget 'Cliff'

Ian Scott on Monday, April 27, 2009 at 9:49:27 pm

What longer term effect will the stimulus have on state budgets?  This question, which has been floating since the stimulus was originally proposed, is now getting some attention.

In a post to its Vote4Biz Blog last week, the Detroit Chamber wrote:

"...stimulus funds can help balance the Michigan budget in Fiscal Years 2009 and 2010, they also create a real possibility of aggravating the ongoing structural deficit by permitting policy makers to postpone actions to bring long-term revenues and expenditures into balance."

The post goes on to claim that the stimulus will: "cause a revenue 'cliff' when the additional federal funding expires."

The term "cliff" when applied to budgetary consequences of the stimulus is getting some traction.  Photos last week show Indiana Governor Mitch Daniels addressing reporters in front of a chart simply titled "The Cliff."  Choosing another metaphor, Iowa State Senator Jeff Danielson (D-Waterloo) described the Iowa's portion of the stimulus as: "$529 million Band-Aid."

Cliff or Band-Aid, state legislatures are using the stimulus to delay hard budgetary decisions for another year.

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