State Budget Cuts, Reconsidered

On May 11, when Wisconsin's State Budget Office announced that two-year tax revenue would be $636 million more than expected, school officials were heartened. They hoped the newfound money would be used to help restore an $834 million cut in school funding proposed by Governor Scott Walker. It wasn't to be. Within hours of the announcement, Walker said he wanted to use the money in other ways, including retiring the state's bond debt ahead of time. "Just like Wisconsin families," he said in a statement, "our first priority is to pay off past-due bills and debts."

A new chapter in the budget drama is playing out in statehouses across the country as the recovery begins to kick in. State revenue tumbled when the effects of the housing collapse rippled through the economy in late 2008. Governments reacted by increasing taxes and cutting services. In a handful of states, Republicans have called for reforms meant to shrink government and reduce the number of state employees. Now the rationale for those policies is beginning to weaken.