Every one of the 50 states, save Vermont, has a constitutional or other requirement that it produce a balanced budget. But the existence of large debt in many states calls into question the validity of claims that the budgets are in fact balanced.
The New York Times notices this trend, and says:
many state and local governments have so much debt — several trillion dollars’ worth, with much of it off the books and largely hidden from view — that it could overwhelm them in the next few years.
If some states have used “fiscal sleight of hand to stay afloat,” that number certainly includes Minnesota, which has employed a “school funds shift” for several years now. Whether or not school funding should be cut is a legitimate question; both the Legislature and Gov. Pawlenty have instead forced schools into lender-of-last resort.
Another fiscal problem facing the state is the collection of underfunded pension funds. Pension funding is a classic case of short-term, politically-driven expediency: Today’s politician buys labor peace by promising union workers benefits in the future that are not funded by the necessary amount of tax funding today.
The Times notes that some states (Minnesota included) have also avoided hard choices (raise taxes or cut anticipated spending increases) by relying on one-time aid from the U.S. Government.
Minnesota’s next class of political leaders have a lot of work before them, including deciding what to do about the school funding shift, a budget deficit of some $6 billion (if the state is in fact going to go forward with previously agreed-upon increases in spending) and its pension obligations.
For more on pensions, see our pension reform project.