With New Fiscal Year Looming, Government Shutdowns Unlikely

By: - June 29, 2012 12:00 am

Six states still have work to do to finish their budgets before the July 1 start of the new fiscal year. But barring a late surprise, only one state is at risk of a government shutdown because of incomplete budget work: New Jersey.

The shortage of drama reflects the relative ease states had in completing their budgets this year. After a series of difficult years during and immediately after the recession, states’ fiscal positions improved this year, which made it easier for lawmakers to find agreement on new spending plans.

It also helped that many of the states that had the toughest time approving their plans in 2011 are two-year budget states, meaning they didn’t need to act again this year. That group includes Minnesota, which had a three-week government shutdown last year because legislators and Governor Mark Dayton couldn’t agree on a budget.

In New Jersey, Republican Governor Chris Christie and the Democratic-controlled legislature are clashing over tax cuts. Christie proposed an income tax cut this year, but instead the legislature has sent the governor a budget offering property tax breaks that kick in only if state revenue collections meet targets. Christie mocked that plan at a town hall meeting this week.

Earlier this month, Christie told his cabinet to prepare for the possibility of a government shutdown. Still, most observers believe Christie will not veto the entire budget, which would create the shutdown. Instead, he’s expected to use his line-item veto power to reject parts of it.

This is the third consecutive year that Christie and the Democrats have clashed on taxes, but so far those disputes have never led to a shutdown. In all three years of Christie’s term, the legislature has sent him a tax increase on high-income earners. He vetoed it in each of the past two years and he’s expected to do the same this year.

Elsewhere, states are mostly tying up loose ends.

In Delaware, where lawmakers typically wait until the last moment to pass a budget, the Senate approved its plan on Wednesday. Now the House must act too, but, like the Senate, it’s controlled by Democrats and there aren’t any indications of difficulties.

The Illinois legislature approved a budget weeks ago, but as of yesterday the Senate hadn’t actually sent the budget bills to Governor Pat Quinn to sign. This has prompted speculation that legislative leaders are trying to force the governor to accept the whole budget by not giving him time to veto specific parts of it. Last year, Quinn signed the budget June 30.

In Massachusetts, legislative negotiators reached agreement in principle on the budget on Wednesday. As was true last year, the state is likely to rely on a short-term budget to cover the first few days of the fiscal year, until Governor Deval Patrick signs the full document.

Pennsylvania Governor Tom Corbett and his fellow Republicans, who control the House and Senate, are aiming for an on-time budget, but as of yesterday some pieces of the plan were still in flux, including a new framework for offering aid to counties.

South Carolina negotiators reached agreement Tuesday on a small business tax cut, the issue that had held up the budget for weeks. Nonetheless, as in Massachusetts, the state is likely to operate for a few days with a short-term budget because Governor Nikki Haley has said she will need time to determine which parts of the budget she wants to sign and what she will veto.

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Josh Goodman

Josh Goodman helps lead research on fiscal management and place-based economic development programs as part of Pew’s state fiscal health project. Goodman has served as a primary author for Pew studies that examine how states should evaluate tax incentives and maintain budget discipline when implementing those incentives.