By CHARLES M. ARLINGHAUS

Gov. John Lynch’s proposed budget for 2009-2010 creates important policy priorities and sets a good path not just for the rest of the budget process but for the future.

I have been critical of the budget for not moving revenues and expenditures closer to balance over the next 2 1/2 years and instead relying on one-time revenue sources to delay the hard decisions. We shouldn’t lose sight of that, but the budget also includes a lot of good ideas that deserve to be implemented.

The reality of the budget is dictated by the serious financial crisis. In the four months remaining in the current two-year budget, the governor estimates a deficit of $125 million to $140 million. He must adjust spending and revenues to erase that deficit and then close a shortfall in the next two-year budget.

According to the governor, it would cost $1 billion more than we can expect to raise in current taxes to fund agency budget requests. The agencies never get what they wish for, but even a spending freeze would reduce the budget hole to only about $550 million.

There are two ways to cut spending. One is the hunt and peck method. People who don’t manage departments and don’t have detailed information hope to find the latest bridge to nowhere or state nursery we don’t need. Some cuts will come from hunting and pecking, but the ideas tend to be more serendipitous and less strategic.

The governor pointed out a few hunt-and-peck-style proposals, such as cutting a geography program at Keene State, but the bulk of his savings come from something that we might call directed management. Gov. Lynch has 18 department heads and a host of agencies under his direction. His managers are much more intimately familiar with the details of their operations than he or anyone else in state government. The budget makes many changes that they came up with, but it also includes what used to be caricatured as “across-the-board cuts.” Lynch doesn’t make every agency cut 10 percent of its budget. Rather, he assigns a dollar amount to an agency and expects the management team to identify cuts in that amount.

This helps avoid a problem Gov. Walter Peterson has talked about. Peterson noted that when a governor asks his commissioners for cuts, the less helpful ones will propose cutting their most popular programs, knowing full well that no legislature would approve such a thing. Directed management avoids that by specifying not the program but the dollar amount.

Lynch’s proposed budget directs unspecified cuts in the Bureau of Land and Tax Appeals, Health and Human Services, the judicial branch, the legislative branch, the Executive Council, Safety, Transportation, the Liquor Commission and the Community College System.

He cuts more than $65 million through these back of the budget footnotes. Directed management is a good way to make the most of the valuable management team we have working in state government. We should hope the Legislature does even more of it as the budget moves forward.

More than just managing spending reductions, the governor has proposed changing how we do things. Much is made of the proposed 350 layoffs, but the governor isn’t cutting state employees as much as changing what they do. In fact, the budget calls for the total number of state employees to increase from 12,439 to 12,517. Some areas may shrink, but there will be more employees in total.

Conservatives and liberals alike are looking at criminal justice reform. Two decades ago, Sen. Gordon Humphrey talked about electronic bracelets and home confinement. The governor has proposed revisiting that idea. Ten years ago, Charlie Russell (in a paper for the Josiah Bartlett Center) proposed better use of treatment programs to try to keep prisoners from coming back once they were released. The governor wants to look at that idea as well.

No one would suggest that violent crime doesn’t demand swift and certain jail time. But the governor is absolutely right to look at ideas to save the state money and make society safer.

Many other principles in the governor’s speech point the way forward to reform. The liquor commission’s job can be equally well accomplished in “agency stores” as in state-run stores. In fact, wine sales occur half in state-owned stores and half in private stores. No reason then not to look at letting stores that sell wine and fortified wine also sell spirits.

The governor also had sensible things to say about combining state departments in the long term, eliminating dedicated revenues and sunsetting state agencies. If you want to rethink state government, that’s a good start.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.

There is no denying that our health care system – both in Texas and the nation as a whole – is in need of substantial reform. But expanding the SCHIP program is a big step toward universal health care – the wrong direction.

When President Obama reauthorized the SCHIP program, he allowed for states to expand their eligibility requirements from 200 percent of the Federal Poverty Level to up to 300 percent. Expanding any government health care program increases the financial obligations of the state of Texas, not to mention the federal government’s control over your health care.

Extending CHIP benefits to families that make up to $66,000 per year would morph the program away from its original purpose – providing health insurance to children of the working poor – into an expensive entitlement for the middle class. Later this spring, our legislature will consider bills that would implement that expansion in Texas. Such an action would be a costly mistake.

Texas’ Health and Human Services Commissioner Albert Hawkins testified recently that expanding CHIP eligibility will require an additional $127.6 million in state funds over the next biennium. Not only will costs rise for this program but so will the caseloads. Rather than expanding eligibility, the legislature should focus on enrolling children who are already eligible. This year, more than 170,000 children projected to be eligible are not covered.

Texas legislators should hold true to their values and convictions. Instead of putting more Texans onto taxpayer-funded programs like CHIP, they should instead look for other ways to provide access to health care. Increasing competition to provide more accessible choices to Texans is a better option than expanding a governmental program. Our legislature needs to be mindful of our state’s long-term budget picture and their principles of limited government when this issue comes to a vote in the coming months.

- Andrea Whitman

Today’s “Goofball Bill of the Day” circulating around the Wisconsin Capitol:
Re: Co-sponsorship of LRB 2074/1, charges for inmate telephone use at a jail or house of correction
From:  State Rep. Frederick P. Kessler
Date:  February 25, 2009
Re:  Co-sponsorship of LRB 2074/1, charges for inmate telephone use at a jail or house of correction
This bill restricts the [...]

One of MPI’s founding contentions is that Americans need a filmography of freedom. There is no better medium for exploring the ideal of liberty–and, quite arguably, there is no artistic medium more underused for that purpose. We’re trying to change that, one film at a time. And freedom-oriented policy groups are starting to notice that film is–or ought to be–where the action is.

On March 18, the Fund for American Studies will be holding a roundtable discussion entitled “Liberty on the Big Screen.” MPI fellow Chandler Tuttle–whose 2081 stunningly adapts Vonnegut’s “Harrison Bergeron” for film–will be participating. Drinks are at 6:30, and the panel will begin at 7 p.m.

March 20th is the date by which the City expects to have a good idea of whether leasing the parking garages in order to generate an upfront lease payment is, well, a good idea.

Recall that the Mayor has proposed leasing the Parking Authority’s garages, and possibly surface lots and street meters, in order to receive an upfront payment to retire Parking Authority debt ($108 million) and plow the rest (the City is hoping for at least $300 million) into the City’s three pension funds, which have low funded ratios (assets divided by liabilities) that have taken a further hit from the economy.

By March 20th the Parking Authority wants to have proposals from consultants who will tell them if they should move ahead with the idea. A bit convoluted and maybe a bit of foot dragging (the proposal is for a consultant who will help them to find the financial consultant, who will then tell them whether or not to move forward), the Authority is open to hearing about various methods of getting the money (lease or outright sale) and is looking for the best return on the assets from the deal.

In designing the plan the City looked at Chicago, which, after getting upfront cash from its parking garages, just commenced the nation’s first long-term lease of parking meters. The City’s 36,000 meters generated a payment of $1.15 billion, and that money will be funneled into a variety of uses.

If the City of Pittsburgh successfully negotiates a long-term lease and is able to prudently manage the pension system and start to downsize the City workforce to align it more with population, then the asset swap would prove to be a well-designed plan. But an infusion of cash does not guarantee solvency—after all, the City plowed money from bond sales into the pension funds in the late 1990s and that money was gone soon after.

And the City can’t micromanage the lease too much either through overly strict control on who gets hired and how much rates can increase—that would be a 180 degree turn from the attitude that helped get the garage idea on the board in the first place. Chicago has seen significant rate increases (some meters are just getting increased for the first time in two decades) but they are also getting innovations like cashless meters. So it is important to let the market work in this experiment.

No policy better demonstrates how the tax code distorts the market than the federal income tax deduction for mortgage interest. Ed Glaeser offers a modification to this gem.

“Lone Star Lesson” is a daily radio commentary on today’s most important issues featuring Justin Keener, the Foundation’s Vice President of Policy and Communications. The segments air on KVCE 1160 AM (Dallas/Fort Worth) each weekday at 6:18 a.m., 8:15 a.m., 10:20 a.m., 3:15 p.m., and 5:15 p.m.

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The drumbeat of bad news continues. WASHINGTON (AP) — Brace yourself: The recession is projected to worsen this year. The country stands to lose a sizable chunk of economic activity in 2009 as…

Congratulations to Nick Tucker, whose sharp and funny Do As I Say has just been made an official selection of the 2009 Newport Beach Film Festival.

Sign up to bring Do As I Say to your area at DoAsISayMovie.com–and become eligible to win a free iPod Nano!

According to a recent newspaper report, area malls are struggling. Unfortunately the newspaper neglected to mention one of the major causes of mall struggles. While malls having difficulty is not surprising news during a recession, the high vacancy rates locally have more to do with government subsidies than lack of consumer spending. The promise of government handouts had caused retail construction in the area to proliferate creating unfair competition with older, non-subsidized malls. For example, Century III Mall in West Mifflin ha substantial vacancies and has been in decline for quite a few years—partly due to the opening of the subsidized Waterfront shopping complex in nearby Homestead. The Waterfront, which has received tax increment financing (TIF), was given a decidedly unfair advantage over its older rival.

Other retail complexes receiving TIFs includes the South Side Works and Pittsburgh Mills Mall in Frazer Township. Both are new complexes, have received government largess, and are experiencing vacancy problems as well. One national expert said that we are over-retailed and that many more malls, retailers, and restaurants will go out of business before it gets any better. This thought is reinforced by labor data showing employment in the retail sector at its lowest level in eighteen years.

Subsidizing retail is poor policy and one that we repeatedly warned officials about. They refused to listen as the Lazarus and Lord and Taylor department stores closed leaving taxpayers on the hook for millions. Now suburban malls and shopping centers are experiencing this reality as “for rent” signs have become commonplace around Allegheny County.