The federal government has spent more than it has taken in during 44 of the last 50 years. The last balanced budgets occurred in the four-year period from 1998 to 2001, and there were two earlier instances in the 1960s. While the nation’s government never has been required to balance outlays against receipts, the continuing budget deficits and rising debt have created momentum for a balanced budget amendment to the U.S. Constitution.
Perhaps the states can point the way on this issue. Forty-nine state governments operate under some form of balanced budget requirement. (In Vermont, the lone exception, balanced budgets are also the rule; state officials say they need no legal limit.) The fiscal discipline that balanced budgets help to enforce is considered a fundamental strength of state government.
According to the National Conference of State Legislatures, state balanced budget rules comprise three types of limits:
• Requiring the governor to propose a balanced budget.
• Requiring the legislature to adopt a balanced budget.
• Preventing deficit spending during the year.
Alabama is one of 29 states that employ all three measures. The first two are based on estimates and can be uncertain; however, the third is a “fail-safe” limit that ensures control over spending. Here’s how it works in Alabama: The state cannot pay a bill unless there is sufficient money in the account from which it is to be paid. The governor must prorate state spending in midyear, if necessary, to prevent deficits. And unpaid bills are canceled at year-end if no money is available in the state Treasury to pay them.
A number of balanced budget proposals have been introduced in Congress. They would limit not only total federal outlays but also tax increases and debt; however, they would allow Congress to override the limits during wartime or by “supermajority” votes of three-fifths to two-thirds of the members. In addition to requiring a balanced budget, some of them would limit federal spending to a certain percentage of the nation’s economy. However, the proposals do not indicate how Congress will control open-ended spending for such programs as Social Security, Medicare and Medicaid, which account for a large share of the federal budget. Enforcing spending limits would be critical, as it has proven to be for state balanced budget procedures.
EDITOR’S NOTE — Jim Williams is executive director for the nonprofit, nonpartisan Public Affairs Research Council of Alabama. Jim may be contacted at jwwillia@samford.edu.
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