Monday, December 04, 2017

From the Archives: Mercatus Center economist Eileen Norcross notes state budget ‘fiscal evasion’

Mercatus Center economist Eileen Norcross notes state budget ‘fiscal evasion’
December 4, 2010 12:43 PM MST

On December 1, the Mercatus Center at George Mason University hosted its annual holiday dinner, this year featuring novelist Christopher Buckley as after-dinner speaker. About 300 people attended, also hearing pre-dinner remarks from GMU economics professor Russell Roberts, co-creator of the viral video, “Fear the Boom and Bust” with rapping versions of F.A. Hayek and J.M. Keynes.

Eileen Norcross Mercatus Center fiscal evasion
Economist Eileen Norcross is a senior research fellow at the Mercatus Center who closely follows state and local budgetary policy. Two of her recently published working papers are “Fiscal Evasion in State Budgeting” and “The Crisis in Public Sector Pension Plans.”

At the cocktail reception preceding the dinner, Norcross spoke to the Charlottesville Libertarian Examiner about the crisis in state budgets across the country.

‘Persistent budget deficits’

State and local budgets are an important research topic, she said, “because so many state and municipal governments are experiencing persistent budget deficits. They’re finding it difficult to balance their books and it’s projected that states are not likely to find fiscal balance until 2013.”

There are common reasons for this situation that cross state lines, Norcross explained.

“States have growing pension obligations that they have not funded. These bills are coming due. They’re going to have to contribute more to their pension systems to pay public sector workers. This is going to crowd out their ability to meet their growing Medicaid obligations.”

Workforce cutbacks

Eileen Norcross Mercatus Center GMU
Eileen Norcross
Moreover, with state revenues falling, their spending grew “in the decade leading up to the recession,” she said. “They’ve built commitments into their budgets that they’re now finding it very difficult to cut. That means cutting back on the public sector workforce and other things have become very challenging for states.”

Even with money from the federal government, the situation is still serious.

“With the stimulus drying up they don’t have much to go on here,” Norcross said. “They’ve either got to raise taxes or find other places to cut.”

In the second part of this interview, Norcross answers questions about constitutional requirements for balanced budgets, deferred pension obligations, and the negative effect of stimulus money on state budgets.

Publisher's note: This article was originally published on on December 4, 2010. The publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to since April 6, 2010. It is reposted here without most of the internal links that were in the original.

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