Most States Turn Red, as in Debt, Affecting Arts

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A high-level State Budget Deficit Task Force warned Tuesday of America’s states and local governments falling deeper into debt, which will lead to heavy strains on health care, pensions, education and infrastructure. The forecast is so dire-with unfunded services in the trillions-the 112-page report doesn’t even address–except for a mere mention–the arts, which receive only a small part of state and local budgets.

However, as state and local funds dwindle, leaving less money available for major areas such as Medicaid, schools and capital improvements, it seems logical that cut-prone governors and lawmakers will prove less inclined to support arts budgets. That will mean at best arts funding will stay level, but most likely will fall and could be eliminated.

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Also, we’ve already seen cases of drastic arts cuts for 2010 in Georgia, Michigan, Florida and Illinois, in 2011 Kansas’s Republican governor abolishing the state arts commission, and just this month South Carolina’s governor scrapping its arts panel. That could become more common among conservatives as each state and city has to make even harder fiscal decisions.

That, in turn, will mean artists, arts facilities, and arts advocates will need to organize and get creative: both to defend funding already in place, and to define and find new financial sources in a bleak economy.

Former New York Lieutenant Governor Richard Ravitch and former Federal Reserve Board Chair Paul Volcker created the 11-member, high-profile task force “because of their growing concern about the long-term fiscal sustainability of the states and the persistent structural imbalance in state budgets, which was accelerated by the financial collapse of 2008,” the report noted.

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The task force, hoping to understand threats to fiscal sustainability, examined six states in depth: California, Illinois, New Jersey, New York, Texas, and Virginia

“While all states are different, these states reflect important geographical and political differences within our country,” the report explained. “They account for more than a third of the nation’s population and almost 40 cents of every dollar spent by state and local governments. All six states face major threats to their ability to provide basic services to the public, invest for the future, and care for the needy at a cost taxpayers will support.”

The report stressed that three large expenditures are “growing at rates that exceed reasonable expectations for revenues”:

• Medicaid programs are ballooning because of increasing enrollments, escalating health care costs and difficulty in implementing cost-reduction proposals. At recent rates of growth, state Medicaid costs will outstrip revenue growth by a wide margin, and the gap will continue to expand.

• Pension funds for state and local government workers are underfunded by approximately a trillion dollars according to their actuaries, and by as much as $3 trillion or more if more conservative investment assumptions are used.

• Unfunded liabilities for health care benefits for state and local government retirees amount to more than $1 trillion.

The task force also said states have an “increasingly impaired” capacity to raise revenues, for two main reasons:

• Untaxed transactions are eroding the sales tax base. Gasoline taxes are eroding as well, making it more difficult for states to finance roads, highways, and bridges.

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• Income taxes have become increasingly volatile, particularly during and after the recent economic crisis.

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The federal budget crisis will also have a spillover effect on both state and local governments, and the effect on states will further affect localities:

‚Ä¢ Cuts in federal grant dollars, lower spending on federal installations, procurement, and infrastructure, and potential changes to the federal tax code all threaten states’ fiscal stability.

• Pressures on local governments, caused by the weak economy and cuts in state aid, are constraining education spending, law enforcement, aid to the needy, and the institutions that make up the culture of our cities. Local government cuts pose a significant risk to the overall economic and social fabric of states.

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The task force complained that state budget practices also “make achieving stability and sustainability difficult.” Yet the group said it wasn’t in a position to suggest programmatic changes for government. That’s up to voters and elected officials in a democratic society.

“We do, however, believe that certain basic procedural approaches should be introduced and followed by all states and urge that prompt attention be given to financial relationships among all levels of government.”

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Transparency and accountability are at the basis of the task force’s urgings, along with examining the relationships among the federal, state, and local governments. The task force did stress, “Prompt attention is needed to the effects that federal deficit reduction and major changes in the federal tax system will have on states and localities.”

With all this chaos of the coins occurring nationwide, what can the arts community do to take care of itself? New York arts advocate Norma Munn addressed this in February, five months before the task force released its report this week, as she spoke about the New York State Council on the Arts:

We must begin the process of sharing with the legislature ideas and concepts for re-imagining the State Council, both as we discuss this [2012] funding request and in the months ahead. We believe that the arts build social capital essential to a civil society, that we transcend differences among groups and open the door to greater understanding between the incredibly diverse people of this great state. We believe that artists and arts workers have skills that are needed in the innovative industries of today, and many are already working in those industries. We know that cultural activities and events are critical in bringing tourists to the state. We offer as yet untapped solutions to assist with the economic re-development and job creation of this state.

These are valid points arts advocates in every state might, in fact must, take to their legislators, on both the state and local levels.