For those who think state and local goverments are wallowing in surplus cash, the Commerce Department had a bit of news yesterday: it's vanishing.
New federal figures peg the state and local surplus at $11.5 billion during the first three months of this year, down from a previous estimate of $18.1 billion.
And a department expert on local and state finances predicted that the second quarter surplus will turn out to be about $7.5 billion, and the excess for the current three-month quarter "will be close to zero."
One reason for the decline is that states and localities all across the country have increased their spending on public works, such things as bridges, roads and sewers. A second is that, in California, localities will be collecting several billion dollars less in property taxes in the wake of Proposition 13, the expert said.
Calfornia was able to blunt the effect of the measure, which cut local property tax revenues, by sharing its $6 billion surplus with cities and counties.
The new figures are particularly important to the states "because we were encounting the idea all over Capitol Hill and in the administration that states are somehow flush with cash," said Stephen B. Farber, director of the National Governors' Association.
"We've been saying for months that it's not true, and now for the first time the Commerce Department is sustaining our view," he added.
Farber cited the new department figures yesterday at a hearing by the House subcommittee on the city and Congress' Joint Economic Committee.
"It is frankly high time to consign the myth of the massive state surplus to the oblivion it deserves," Farber testified. "Inaccurate data will lead to unsound public policy."
Farber said later that some members of Congress have suggested reducing the federal share in certain federal-state programs. One proposal, he said, was to change the formula in the Older Americans Act from 90 percent federal and 10 percent state financing to an 85 to 15 ratio.
The administration proposed in March that states be excluded from a new supplmental fiscal aid program to local governments and cited figures showing large state surpluses, Farber noted.
He said a recent survey by the National Association of State Budget Officers indicates that the total operating Budget surplus for states is $6 billion and that by next June 30 it will be $4 billion to $5 billion. The $6 billion is about 6 percent of state operating funds and may not be sufficient to meet emergencies, he suggested.
State spending on local government is $73 billion, double what is was 12 years ago, Farber said.
In other testimony before the committees yesterday, Jason Boe, president of the National Conference of State Legislatures, said Calfornia's adoption of the tax-slashing Proposition 13 indicates that "the taxpayer revolt is a loaded gun pointed directly at Congress.
"The first bullet has hit local governments and the second bullet may his state government. But the federal governments is the ultimate target, and the third bullet is already on its way to Washington, D.C."
Unless Congress reduces the federal deficit and considers the economic impact of its legislation, he said, "the voters will take the matter completely out of your hands." Boe predicted that "within the next five years we will see a constitutional convention. The mood out there is to grab hold."