Learning From Solvent States

During the booming '90s, states enjoyed what was called an "April surprise." Their coffers bulged at tax time from investors' gains in the stock market.

Surprise, surprise. It didn't last. Now, after years of raising spending and not saving enough for a recession, most states are in budget shock. They must make spending choices they should have made earlier.

A lesson for the future can be learned from the five states that are still in the black: Nevada, Montana, North Dakota, Louisiana, and West Virginia. With smaller economies, they were on the margins of the long economic expansion, but nonetheless remembered to save for a rainy day. They withstood the temptation to overspend any extra revenues.

What should the other states do now? Governors of Kansas, Minnesota, and Ohio, among others, say revenue sources need to rise. Dipping into reserves, tapping tobacco-settlement monies, or raising cigarette taxes are options that many states have considered. In Ohio and Alabama, plans are afoot to increase corporate taxes by closing loopholes.

One solution is to look back at the spending priorities of the early 1990s, before the politics of plenty began. Who were the deserving back then?

Legislators also can tell voters what sort of fiscal discipline they will follow when the April surprises return.