Spend or Cut?

Associated Press

JEFFERSON CITY, Mo.

As legislatures return to action and governors outline their budget plans, politicians in many states are facing a pleasant election-year challenge: What to do with all the extra money?

A slow but steady economic recovery is generating more tax revenue than many states had anticipated, offering elected officials tantalizing choices about whether to ply voters with tax breaks, boost spending for favorite programs or sock away cash for another rainy day.

It’s a tricky question because of the economic experiments begun almost nationwide since the recession. A couple of dozen states controlled by Republicans have been seeking prosperity with tax cuts and less government. Their Democratic counterparts have sought to fortify their economies by investing more in education and other social services.

The clamor for new spending is already revealing fissures among some governors and lawmakers. And clashes have arisen even within the same party, suggesting that the debate in some places could widen beyond typical partisan disputes.

Democratic New York Gov. Andrew Cuomo, for example, wants to tap a surplus to cut taxes, despite other Democrats’ ideas for new spending. In Louisiana, Republican Gov. Bobby Jindal wants to steer the surplus to education and health care.

The National Association of State Budget Officers projects that almost all states will see “fairly decent surpluses” in their 2014 budgets. For some, it may be the first extra cash since before the recession began in late 2007. In many states, the surpluses coincide with elections that mark the first opportunity for officials to be judged on the results of their economic policies.

Voters in November will choose 36 governors and more than 6,000 state legislators in what amounts to a referendum on whether they want to continue the single-party dominance that currently exists in three-fourths of state capitols.

In California, once the epitome of busted budgets, a resurgent technology sector and recent temporary tax increases have generated forecasts of a $3.2 billion budget surplus. Democratic Gov. Jerry Brown wants some increased spending but also to pay down debts and rebuild a rainy-day fund.

“It isn’t time to just embark on a raft of new initiatives,” Brown warned.

Yet the pressure for more spending already is building among Democrats who control the Legislature. Some want to reverse cuts for welfare programs or launch a new preschool initiative.

In Republican-led Louisiana, Jindal’s desire to use the surplus for education and health care will be competing with other GOP calls for highway construction and restocking a state reserve fund.

Some states with surpluses are not necessarily in great fiscal shape. They still have underfunded pension systems, shortfalls in school funding formulas and infrastructure needs that far exceed their available dollars for roads and bridges.