In a report released on Monday, the Volcker Alliance gave good marks to California and Virginia for having their financial act together. The nonprofit organization, which was founded by former Federal Reserve Board Chairman Paul A. Volcker, hopes the study’s findings may one day serve as a baseline for other states’ financial practices. They could use the help.
States saw their revenues dip by over $77.6 billion between 2008 and 2010, largely due to the recession. Volcker wants to “help rebuild public trust in government” and institute a states “grading” system in the future.
The goal of the report, which is titled “Truth and Integrity in State Budgeting: Lessons from Three States,” is to shine “a spotlight on opaque and confusing practices and [identify] more appropriate approaches,” according to a release. It’s an offshoot of a study conducted by the State Budget Crisis Task Force, which was chaired by Volcker, and came with an assist from former New York Lieutenant Governor Richard Ravitch, from 2011 to 2014, the report explains.
“We invite and encourage governors, legislators and all who are involved in this process to work with us in developing these approaches,” said Volcker in a statement.
So, which states are the shining examples?
The state has revamped its budgeting practices, thanks to voters reforming budget approval requirements from two-thirds to a simple majority. Voters also approved a hike in sales and income taxes and voted for changes in the way corporations are taxed. The reforms led to a $254 million dollar surplus in 2013, along with California debt obligations going from $34.7 billion in 2011 to $26.9 billion in 2013.
Virginia also received praise from Volcker. “Its budgeting practices provide for strategic planning for both revenues and capital spending, repeated revenue re-estimation, strict statutory constraints on borrowing, and an actively employed rainy day fund,” according to the organization. Virginia has also passed three major pension reforms and has raised taxes in a targeted way to help improve the state’s infrastructure.
New Jersey, on the other hand, didn’t fare quite so well due to its “chronic inability…to match its revenue streams with its expenses.”