2024 Solutions Spotlight: Responsible Budgeting & Putting America’s Fiscal House in Order

As many states continue find themselves with budget surpluses at the end of fiscal year 2023, the ALEC State Budget Reform Toolkit is a great resource. The toolkit outlines 23 proven policy solutions for states to improve their budget process, while avoiding wasteful spending and economically damaging tax increases.

States’ dependency on federal funds has accelerated in recent years. Federal funding to the states comes in many forms such as education spending, Medicaid, infrastructure spending, and housing grants. But these dollars often come with costly strings attached, and funding levels can change, leaving state taxpayers to foot the bill.

States should learn from Utah, which passed its Financial Ready plan in 2013. This package of bills created a Federal Funds Commission to monitor the impact of federal overspending on the state. It also required every state agency to have an emergency action plan in the event of a 5%-25% reduction in federal funding.

Another way to stabilize budgets over time is to embrace Tax and Expenditure Limitations (TELs). The most effective TELs, like Colorado’s Taxpayer’s Bill of Rights (TABOR), require voter approval to raise taxes or issue debt. Policy reforms like TABOR give hardworking taxpayers more protection and ensure that state budget growth is stabilized at a reasonable level. ALEC’s Fiscal Rules microsite and animated video explore how a hypothetical TABOR could help control state spending and taxes.

• Model Policy
  • Federal Grant Review Act
  • Federal Receipts Reporting Requirements Act
  • Tax and Expenditure Limitation Act
  • Taxpayer Receipt Act

• Publication
  • State Budget Reform Toolkit

• OP-EDs
  • National Review: Colorado Offers the Gold Standard for Fiscal Restraint
  •  The Orange County Register: States Must Respond with Discipline after Credit Downgrade

America’s strength domestically directly impacts our ability to meet global challenges and to be helpful to our friends around the world, so putting our nation’s fiscal house in order is crucial to our success here and abroad. Inflation exacerbated by federal overspending is striking a serious blow to US households that are still recovering from the economic hardship created by the COVID pandemic response. This fiscal reality underscores the need to address the federal government’s unsustainable spending habit and to begin chipping away at the national debt which is approaching $34 trillion. Congress has consistently demonstrated that it is unable to police itself, leaving it to the states to restore fiscal sanity to the nation.

• Model Policy
  • Act to Ensure US Amendments Ratified by Article V State Conventions Are a Vote of “We the People”
  • Article V Application for a Federal Fiscal Responsibility Amendments Convention to Curb Runaway Inflation and Restore Fiscal Sanity

For more policy ideas, check out our Essential Policy Solutions for 2024.