State Budgets: Them and Us
From time to time as Premier I faced not arguments so much, but rather a need to explain the case for budget responsibility. The case for matching big increases in public investment with a measure of debt retirement. The need for balanced budgets when revenues are booming. The need to resist unaffordable increases in entitlements for public servants. The urgency of fixing a growing deficit in the workers’ compensation fund.
I’ve had to put up with the occasional comment I was “penny-pinching”, obsessed with debt reduction, too reluctant to plough up borrowings.
Oh yeah ? Well, I didn’t want to see New South Wales end up like Victoria in the early 90s. And I knew that if Labor governments produce a fiscal collapse like that Victoria saw all you get is a conservative reaction when, for the better part of a decade, they get to run riot with their own agenda.
The US states provide another argument for Labor governments sticking to sound fiscal policy. The primary system gives public sector unions great influence over Democratic Party-dominated state legislatures like those of New York, California and New Jersey. They handed out excessive pension benefits to the state employees and drove budgets into chronic deficit. Now the reaction is setting in. In New Jersey it’s already meant big cuts in school budgets. California, too, with worse to come if Jerry Brown is going to close the $28.5 billion budget gap and get state pensions back on an actuarially sound basis.
In these crises the public is going to see standards go backwards and public servants are going to loose heaps of conditions and entitlements, even their right to collective bargaining.
Reckless budgeting always brings a brutal correction. This was a lesson the ALP learnt after the Federal experience of 1972 to 1975.
Between 1995 and 2005 NSW saw big increases in spending on infrastructure ( $61 billion in fact ) but balanced by $10 billion in debt retirement that protected the Triple AAA rating and guaranteed the GFC did not drag the state budget down. Whatever Barry O’Farrell does to reverse Labor programs he won’t find excuses or justification in the state budget which is as different from those of most US states as night and day.