Republican lawmakers have it within their sights to enact what could be the most far-reaching reform of state budgeting in modern times.
The deal on the table would create a real rainy day fund, setting aside monies during boom years to use when state tax revenues fall. The effect would be to slow the growth of state spending and reduce pressure to raise taxes – a top priority for the GOP.
The deal would also give the governor new authority to cut certain spending in midyear if revenues were to dip below a set threshold. For Republicans, this would be a significant victory. Will they seize it?
To bring this deal together, Republicans and Democrats would have to agree to deep spending cuts and a temporary increase in taxes, with the rate falling below current levels after three or four years. Democrats don't want any tax increase to be temporary. Republican leaders, at least publicly, refuse to even discuss the possibility of a tax increase.
So far, the two sides have been meeting separately with the governor. It would be better for both sides to show good faith, with Democrats agreeing to at least discuss further cuts and Republicans willing to talk taxes.
A bad bargain could have dire consequences, but a failure to bargain would surely be worse. If a deal isn't cut this week, lawmakers will miss the chance to place a budget reform proposal on the November ballot. Without that element, it's unlikely the GOP would agree to closing tax loopholes and supporting a temporary tax hike.
Then the dominoes would really fall. If this deal collapses, lawmakers would likely raid local government funds, borrow money, employ accounting tricks and leave town with a reserve fund that would be inadequate to deal with next year's budget crisis.
Such an outcome would extend the state fiscal meltdown to future years, undermine the state's bond ratings and create trickle-down pain for individual cities and counties.
So lawmakers are being forced to choose between the lesser of many evils. The most evil and cowardly of these would be to put off tough decisions until 2009.
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