States Wrestle with Whether to Spend, Save or Give Back Surpluses

Monday, 27 Jan 2014 01:42 PM

By Sandy Fitzgerald

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Many of the nation's governors are planning to take advantage of their states' growing surpluses and revenues by pushing for tax cuts, increasing school spending, and freezing college tuitions, but some are urging caution before rushing to spend the windfalls.

The calls to spend the extra money aren't falling along traditional party lines, reports The Wall Street Journal.

For example, California Democratic Gov. Jerry Brown, saying that "boom and bust is our lot," advocates using his state's expected $4.6 billion surplus to build reserves and pay down the state's massive debt instead of spending it on new programs.

However, Wisconsin's Republican Gov. Scott Walker is seeking tax cuts while putting money toward job training programs, and in New York, Democratic Gov. Andrew Cuomo wants to cut taxes as well, but still spend billions to expand a statewide prekindergarten program and address other education concerns.

"What do you do with a surplus? Give it back to the people who earned it," said Walker in his annual state of the state speech.

But economists are warning that the tax revenue surge is starting to slow down and election-year debates are beginning to intensify over whether to sock the money away as a rainy day cushion, spend it on new programs, or return it to residents in the form of tax breaks. The debates are exposing differing views, even within the parties.

For example, Michigan GOP Gov. Rick Snyder is preparing to face off with his fellow Republicans who control the legislature over how much to cut taxes and how much to hold back for possible troubles ahead.

Tax revenues dropped in 2009 as the recession ended, the Journal reports, but recovered to prerecession levels by the middle of last year. In 2012, however, revenues started growing again in many states and continued to rise well into the 2013 fiscal year.

State reserves hit $67 billion last year, reports the National Association of State Budget Officers, but economists project that revenue growth this year could be less than half of what it was last year.

Related stories:

Surprise! Federal Budget Had Surplus Last Month

Governors Burn Surpluses on Tax Cuts Before Re-Election Bids

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