July 2017
DMGS Capitol Commentary- July 2017
Special Analysis: State Budget Shutdowns
As the fiscal year ends on June 30th, nearly all 50 state governments in the United States (with the exception of Vermont) are required to maintain a balanced budget. This requirement generally comes via statue/law, constitutional amendment, or judicial decision. From state to state, these requirements may vary from the simple introduction of a budget, to a balanced budget, to budgets that are based off of the state's available cash on hand.

Generally speaking: a budget will be proposed, legislators will discuss, amend, and pass the budget, the Governor will sign it into law, and the government will continue to operate smoothly. Yet when budget agreements are not reached, state government may shut down causing inconvenience for ordinary taxpayers and legislators alike. 

2017 has seen a situation where 11 states did not pass their budgets by the June 30th deadline. In some states, such as New Jersey or Rhode Island, political differences between legislators lead to a budget impasse; in other states, such as Illinois, a budget had not been passed in nearly three years; elsewhere, such as in Delaware or Connecticut, the impasse comes down to revenue and taxes. Indeed, each situation carries its own unique mix of local politics, economics, problem solving, and timing before a solution is often reached. 

We have compiled an analysis of states that saw budget impasses in 2017 for this month's Capitol Commentary. Please note that some of the states that we discuss are still undergoing budget negotiations and the situation may still evolve.
State Budget Showdown: Highlights
New Jersey

On Monday, July 3rd, Governor Chris Christie signed a $34.7 billion budget ending a three-day government shutdown that sparked a backlash against the governor. The shutdown stemmed from a plan to restrict the state’s largest health insurance provider, Horizon Blue Cross Blue Shield of New Jersey. Christie had approved of the Democratic-controlled Assembly and Senate’s other appropriations, including $325 million in additional funding from Christie’s proposed budget from February, which include $150 million in additional school funding. 

Legislators worked through the holiday weekend to come to a resolution on the Horizon Bill and budget impasse. On Monday, July 3rd, Assembly Speaker Vincent PrietoSenate President Steve Sweeney, and Governor Christie emerged with a resolution and the state government reopened for business as usual.

Status: Resolved

Pennsylvania and Delaware
On June 30th, the Pennsylvania State Legislature approved a $31.99 billion budget for the 2017-2018 year. While the budget received bipartisan support, lawmakers have yet to agree on a funding package.

As of publication, the House and Senate were in session over the weekend to move various pieces of legislation needed to complete the budget process and remain in negations at the time of publication.

Status: Unresolved

Budget gridlock had lasted for months over issues including a Democratic push to raise the personal income tax and disagreement over changes to the prevailing wage for state construction projects. As a result, the Delaware legislature missed its June 30th budget deadline for the first time in decades. Spending the weekend hunkered down in the state house, legislators reached a deal that included a new spending plan on July 2nd that was signed into law by Governor Jay Carney. 

Status: Resolved

Connecticut and Illinois 
Democratic Governor Daniel Malloy took executive control of the state’s finances on June 30 after lawmakers failed to agree on a budget. Despite having one of the highest per-capita incomes in the country, the nutmeg state could run a $2.3 billion deficit in 2017-2018, roughly 12 percent of the state’s budget.

Lawmakers haven’t submitted a budget to Malloy who has requested a three-month provisional budget that includes cuts and modest tax hikes. Democrats have a 79-72 edge over Republicans in the House. Statements from Governor Malloy’s office indicate that a resolution may be found by the July 18th session of the legislature, but a path forward remains to be seen.

Status: Unresolved
The Democratic-controlled House overrode Republican Governor Bruce Rauner’s veto and implemented a $36 billion budget for 2018, which includes $5 billion in tax increases. The Democratic-controlled Senate sent the bill to Rauner on Tuesday, July 4th. The Governor vetoed the bill before the Senate quickly overruled him. The bill then moved to the House where Democrats overrode the Rauner’s veto. With a $6.2 billion annual deficit and $14.7 billion in overdue bills, credit-rating houses have threatened to downgrade Illinois’s credit rating to junk.

Status: Resolved
Regulatory Insight: Net Neutrality Redux

Just two years ago, the FCC classified internet service providers as carriers under Title II of the Telecommunications Act. The decision forced ISPs to face regulatory measures like public utilities, while ensuring all ISPs treat content equally. Under President Donald Trump’s guidance, the FCC has targeted the regulation, drawing a number of large companies into a fray that may decide how online audiences view content.

On July 12, 2017, a number of website landing pages will display “blocked,” “please upgrade,” or “paying customers only” banners. Fortunately for active users, the banners will only last 24 hours. These protest banners  (example below) will be part of  The Day of Action”,
which is supported by the likes of  Netflix, Amazon, Facebook, Twitter, GitHub, Reddit, OKCupid, Etsy, and a broad coalition of tech, media/social media, e-commerce, and other companies that peg their livelihood to the internet. The campaign aims to raise awareness regarding the Federal Communication Commission (FCC)’s proposed plan to roll back net neutrality measures later this summer.  

Make sure to follow  DMGS on Twitter, Facebook, and LinkedIn for real-time updates. Also, check out  www.capitol-commentary.com for further in-depth analysis on PA, NJ, OH, NY, DC, and beyond. If you have any questions, comments, concerns, or suggestions, please contact  Brett Goldman, DMGS Manager of Special Projects.
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