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Originally published May 13, 2013 at 10:04 AM | Page modified May 13, 2013 at 5:45 PM

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Budget surpluses spur tension in some GOP states

Turns out that cutting was the easy part. Now Republicans who control a majority of the state capitols in the United States face a far greater philosophical dilemma - what to do with all the money when an improving economy suddenly creates a surplus in revenues.

Associated Press

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JEFFERSON CITY, Mo. —

Turns out that cutting was the easy part. Now Republicans who control a majority of the state capitols in the United States face a far greater philosophical dilemma - what to do with all the money when an improving economy suddenly creates a surplus in revenues.

Save it? Refund it though tax cuts? Or spend it?

Though they won majorities in more than half the statehouses on principled platforms of making government smaller, some Republicans now are feeling tremendous pressure to spend newfound money on roads, buildings and schools that had been neglected or cut during the recession-induced downturn of recent years.

"Everybody wants that money," said North Dakota Senate Majority Leader Rich Wardner, where an oil industry boom has fueled one of the largest per capita budget surpluses in the nation.

Only a few states still face budget difficulties several years after the Great Recession forced widespread cuts to public education and social services, according to a new report by the National Conference of State Legislatures. To the contrary, a growing number anticipate that they will finish the 2013 fiscal year with surpluses, some totaling hundreds of millions of dollars.

That has created new tensions in places such as Michigan, Missouri and Texas, where GOP majorities are wrestling with the morality of spending money.

"I like to save money, I like to keep it in the bank, I like to give it back to the taxpayers," said Missouri House Budget Committee Chairman Rick Stream, a self-described fiscal conservative from suburban St. Louis. "But sometimes, you also have to spend money on big capital improvements to move the state forward."

Tax revenues that are running more than 11 percent above last year have given Missouri's largest Republican majority since the Civil War a budget surplus that they estimate at more than $400 million. As recently as a few weeks ago, Stream adamantly opposed spending much of that money. But he now has agreed to use about $120 million to construct an office building in Jefferson City, make repairs to the Capitol and state parks and draw up designs for a new mental hospital. Through such spending now, he said, the state will "save a lot of money down the road."

How states choose to handle their surplus revenues will provide a good first test of whether Republicans can make the cuts they enacted during tough times stick during better times, or whether government will return to its pre-recession levels. Those decisions could depend on whether lawmakers view the financial influx as lasting.

A recent Rockefeller Institute of Government report warned that the surge may be blip caused by wealthy taxpayers taking profits in 2012 to avoid getting hit by a federal tax hike in 2013.

The save-verses-spend conflicts are mounting in a number of states.

Michigan Gov. Rick Snyder - a Republican who is a former accountant - is pushing to sock away more money in a state savings account that already is at its healthiest level in about a dozen years. The non-partisan Michigan Senate Fiscal Agency reported that the state could take in $542 million more in revenue than projected four months ago.

But some in the Republican-led Senate have other GOP-friendly uses for the money.

Although Snyder recently staved off a plan for more emergency dredging in Great Lakes harbors, other GOP lawmakers would like more tax incentives for the film industry or to avoid hunting and fishing fee increases.

A revenue surge also has stirred turmoil among Texas Republicans, who are especially zealous about small government. After previously cutting $15 billion from the state budget, lawmakers convened in 2013 to learn they had $8.8 billion more in revenues than projected.

With the state at its constitutional spending limit, the Texas Senate wants to ask voters to approve using $2 billion to develop more water resources, $2.9 billion for roads and bridges and $800 million for public schools. But tea party conservatives, along with Gov. Rick Perry, are calling for tax cuts. Perry says the state already spends plenty on education, even after it cut $5.4 billion from the schools' budget in 2011.

"We have challenges when we don't have money in this legislative body, and we have even bigger challenges when we do," said Texas Rep. Brandon Creighton, a Republican from Conroe.

Republican-led legislatures in Mississippi and Tennessee voted earlier this year to pour millions of dollars into their savings funds.

But in North Dakota, an oil-development bonanza has pumped so much tax revenue into government coffers that the state of about 700,000 residents now boasts a nearly $2 billion surplus - even after doubling the size of its budget over the past decade.

The newfound wealth has placed unprecedented demands on lawmakers for spending on roads, schools, law enforcement and emergency medical services. The Legislature recently agreed to provide more than $1.1 billion to help western North Dakota communities affected by the oil boom. But some lawmakers said the record appropriation still was not adequate to meet the swelling demands while others complained that the spending was not benefitting their parts of the state.

Wardner, a Republican from Dickinson who has spent 22 years in the Legislature, said the influx of money has created "more tension in the chambers" and made it harder to craft budgets.

"In the past, we just said `no,' because we didn't have the money, and we were done with it," Wardner said. "Now if we say `no,' they say `we have the money.'"

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Associated Press writers David Eggert in Lansing, Mich.; Lucas Johnson in Nashville, Tenn.; James MacPherson in Bismarck, N.D.; Chris Tomlinson in Austin, Texas; and Emily Wagster Pettus in Jackson, Miss., contributed to this report.

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