The Legislative Funding Flaw

When state legislatures pass new programs but don't fund them, they may do more harm than good.
 

In grade school, we both remember lessons titled something like "How a Bill Becomes a Law." The facts seemed straightforward to our grade-school minds. Somebody came up with a good idea, a bunch of other people voted on whether it was really worth turning into a law, and then somebody signed the law.

Simple, right? Actually, no. They left something pretty important out of the textbooks we used. They forgot to mention that after a law was passed for a new program, a legislature had to allow spending in order to make anything really happen.

And that, indeed, is a very important exclusion. As Phil Joyce, a professor at the University of Maryland's School of Public Policy says, "Creating something and giving it money are two different things. When you create something, its actual existence is always subject to appropriations."

Take, for example, Connecticut's State Contracting Reform Task Force, an effort inspired by the contracting issues that landed former Gov. John Rowland in prison. It took a while to actually get the task force up and running, but to this day, the board has received extremely limited funding.

Ditto in Michigan. In 2007, state leaders proudly announced the passage of the No Worker Left Behind program, which was established to transform Michigan's economy in large part by training unemployed or underemployed workers in the state's community colleges. It was potentially a terrific idea. But then the state failed to add financing for the community colleges themselves, many of which are at or near capacity. The result, according to a Hechinger Institute study, was that dollars from the program went to more expensive private institutions.

Or consider the Working Families Tax Rebate in Washington state. It was passed into law in 2008 to help lower-income families deal with the notoriously regressive sales tax, which can put undue burdens on them. But then the budget crunch hit, and the laudable goals of the legislation receded in the face of empty state bank accounts. So Working Families has essentially been a policy on paper only.

The fear among advocates of this Washington initiative is that the longer it takes to put money into this effort, the less likely it may be that it will ever get off the ground. "It's a challenge, because you get to a place where there is no traction," says Remy Trupin, executive director of the Washington State Budget and Policy Center. "We had been able to get a little funding back in, and then the revenue fell again. The program becomes -- I don't want to say toxic -- but there is a sense that it is never going to happen. It is really hard to keep a focus on it."

How does this kind of thing come to pass? There are those who say that legislators are in love with ribbon cuttings and pronouncements of new legislation, and less in love with the nitty-gritty considerations of costs. It can be "more about politics than economics," says Jon Shure, deputy director of the state fiscal project at the Center on Budget and Policy Priorities. "It might be nice for a governor to have a program and get credit for it, and then someone else can be governor when it comes time to pay for it."

Sometimes, there's pressure on elected officials to do something about a pressing matter of the day, and the need to appear to do something can prevail over the actual ability to do it. State and city leaders want to tell their constituents that they are doing something to solve the problem. But when governments are facing fiscal challenges and it comes down to a choice of whether to fund these or cut education, health care or other pre-existing programs, the new programs tend to lose out.

You might think that legislatures would consider whether they can afford a new program before they pass it. Sometimes, of course, the problem is -- as in Washington -- that revenue streams come in under projections. In addition, most states and cities don't look very far ahead when they do their budgeting. They base it on what the costs are today and fail to take into account what the needs will be later.

There are situations where it can actually be worse to provide limited funding than to cut funding altogether. This is abundantly true with capital projects. If a state, city or county wants to put up a $50 million building and it only has $25 million, it's unlikely they'll be able to figure out an effective way to put up half a building.

The Connecticut contracting situation has similar issues. It might be worse to underfund it, as the state has done, than not to start it at all. Providing only a small portion of the money necessary could easily give people the impression that the state is actually doing what it intended, when in fact, it's still vulnerable to the kinds of problems that pre-dated the law. "It's not beneficial to have people think you're doing it," says Joyce, when in fact, you're not.

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