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Battles Loom in Many States Over What to Do With Budget Surpluses

New York Times Feb, 2, 2014: "In a year when three dozen governors are up for election, unexpectedly robust revenues from taxes and other sources are filling most state coffers, creating surpluses not seen in years and prompting statehouse battles over what to do with the money..." http://www.nytimes.com/2014/02/03/us/battles-loom-in-many-st...

This doesn't make sense to me. A year and a half ago, the debt that states were in was at a crisis level. [See article below.] Did things really get resolved that quickly and easily? Or is this just accounting magic? In these statehouse fights over how to spend all the money, how is it that one idea is to... "pay down debts." How can you say you have a surplus if you owe money?

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"10 States With Enormous Debt Problems: Report"
Huffington Post Aug 28, 2012 (Reuters) - "America's 50 state governments owe $4.19 trillion, including outstanding bonds, unfunded pension commitments and budget gaps, according to a new report.

At $617.6 billion, California had by far the biggest total debt, more than twice the total of No. 2, New York, with $300.1 billion owed, according to State Budget Solutions, a research and non-partisan advocacy group."

http://www.huffingtonpost.com/2012/08/28/state-debt-report_n...



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Was it because of all the Republican Governors and State Houses

that went Republican in 2010? Look at Michigan with Governor Snyder, a balanced budget and a state right to work law? In Michigan? WTF? It's getting to the point we don't even recognize the place anymore. LOL

it's the great trick of the American people...

I may be very wrong about this but, this "surplus" is a direct result of all the money they received for "recovery" a few years ago. With most businesses, you get a budget X dollars, and then your department is in charge of spending with a potential for a % of overage or underage without penalty. So say, dept X gets $50 for their budget, but they only spend $30. Well in the business world they would have to either pay back the additional $20 and reduce their budget to $30 the following year. So, the goal is typically to spend up all that money as best as you can, and then perhaps go over by no more than 10%. Going over, might justify increasing your budget.

Well, the government works in the same way however, what most people don't understand is the difference between, budget, deficit, and debt. A budget surplus has nothing to do with being out of debt. Democrats pride in the Clinton/Gingrich years with the "budget surpluses" they supposedly posted. Yet the country was still accumulating billions in debt. They never tell you that.

So what this means, at least to me, is that the government a few years back gave the states tons and tons of printed money for them to address their needs and keep from going bankrupt. Let's just say for example California got 10 billion dollars on the basis of needing that much. As I am aware, the states were also tasked with cleaning up their books, streamlining services etc. Once all of that was said and done, what was once costing 10 billion dollars per year that the Govt was paying to them, now only costs 7 billion (for example) ergo, there is a 3 billion dollar surplus. IF California wants to keep getting 10 billion dollars (yet they clearly only need 7 now) then they need to "add" new expenses to justify the additional 3 billion.

This is why Ron Paul used to "request" lots of pork. Yet vote against it when approved. He didn't want to lose his district's "budget" but did want to cut spending. Make sense?

The deficit on the other had is the gap between how much we really have vs. how much we really need. And then finally the debt is how much we owe. Lots of Americans think in some way or another that a Budget surplus means we are out of a crisis. We are not, essentially we would have to post surpluses every year and use the additional surplus to pay down debt. ie, use your 7 billion, take 10 and pay off 3. And due to inflation, ultimately you would have to keep reducing your expenditures year on year to keep pace, or keep gradually increasing your budget tacked to the rate of inflation (supposedly 5%) and peg your spending at only 1% increases year on year.

Unfortunately, the goal is typically to spend it all and ask for more.

Thank you for the reply. Between both

replies here, I think I understand - insofar as how things are labelled, anyway. But... am I right that the *prudent* thing to do if you have debt is to use what "extra" you have to pay it off? Or how does debt ever get paid off? Just the amount on some "budget item" for that purpose?

The headline and tenor of this article made it seem like, "Happy days are here again, the skies above are clear again..." If you scroll to the bottom, clearly that's not the case: "The result: Optimism about digging out of the recession is occurring at the same moment surpluses are landing. But many experts in state finances say governors and legislatures may be too eager to spend the new money rather than paying down debt, bolstering shaky pension systems or setting aside money for the next downturn..." I don't know how these governors/states are getting away with it.

When we try to pick out anything by itself, we find it hitched to everything else in the Universe.
~ John Muir

A budget is yearly. It's

A budget is yearly. It's possible that the state's income for that particular year is higher than the agreed spending for that same time period.

State debt is not yearly, but is the cumulative and combined sum of all the yearly budget deficits and surpluses. Budget deficits are usually the norm, which is why state's have debt to begin with.