Archives for June 2009

Before discussing a Federal Balanced Budget Constitutional Amendment let us first look at Utah’s constitution that has a section on public debt.

Utah Constitutional Balanced Budget

In Article 14, Section 1 of the Utah Constitution the state is allowed “To meet casual deficits or failures in revenue, and for necessary expenditures for public purposes” by “contract[ing] debts, not exceeding in the aggregate at any one time, an amount equal to one and one-half per centum of the value of the taxable property of the State.” The one and one-half percent can be exceeded only for the public defense as provided by the following:

Article XIV, Section 2.   [Debts for public defense.]
The State may contract debts to repel invasion, suppress insurrection, or to defend the State in war, but the money arising from the contracting of such debts shall be applied solely to the purpose for which it was obtained.

Article 14 has working well for Utah (see the full text of Article 14). The state budgets conservatively because of the constitutional mandate to balance its budget every year. In times of lower state revenues very little money has to be diverted for debt servicing, hence reductions in services can be minimized. A requirement for a balanced budget has also resulted in the creation of a rainy day fund to mitigate the difficulties of revenue shortfalls.

Federal Balanced Budget Constitutional Amendment

Many people baulk at a Federal balanced budget amendment because they feel that it would hobble the government in times of emergency, such as war or an economic depression. But just as the state of Utah makes provision for emergencies in its constitution so too would the federal government. For example, Representative Jason Chaffetz’s (R-Utah) co-sponsorship of a balanced budget amendment has these provisions in a section-by-section summary:

• Section 1. Requires that total spending for any fiscal year not exceed total receipts.
• Section 2. Requires a 3/5 vote for any increases in the debt limit.
• Section 3. Requires that the President’s proposed budget to Congress be balanced each year.
• Section 4. Requires that any legislation to increase revenue must be passed by a true majority of each chamber and not just a majority of those present and voting.
• Section 5. Provides an exception to the balanced budget provisions in times of military conflicts that pose imminent and serious military threats to national security, as declared by Congress.
• Section 6. Requires Congress to enforce this amendment through appropriate legislation.
• Section 7. Stipulates that total outlays do not include repayment of debt and total receipts do not include those derived from borrowing.
• Section 8. Provides the effective date of the amendment.

Representative Chaffetz has this to say about the Balanced Budget Constitutional Amendment:

Washington obviously lacks the discipline to live within its means. We cannot be all things to all people. We are $10+ trillion in debt and the number is growing every day. This is unacceptable and unsustainable…. We cannot continue to run this country by putting more debt on a credit card. The State Constitution in Utah requires a balanced budget. This works well for Utah and will work well for our country.

As can been seen in Section 5, provision is made for exceptions in time of war. The debt limit can be raised by a 3/5 vote which should adequately cover emergencies. See the full text of the balanced budget amendment proposal with 166 co-sponsors.

Over the years there have been several attempts by Congress to pass a Balanced Budget Amendment. The closest was in 1995 when a Balanced Budget Amendment passed the House of Representatives and was one vote shy in the Senate.

The States and a Balanced Budget Amendment

Article V of the Constitution states in part:

The Congress, whenever two thirds of both houses shall deem it necessary, shall propose amendments to this Constitution, or, on the application of the legislatures of two thirds of the several states, shall call a convention for proposing amendments, which, in either case, shall be valid to all intents and purposes, as part of this Constitution, when ratified by the legislatures of three fourths of the several states, or by conventions in three fourths thereof, as the one or the other mode of ratification may be proposed by the Congress; …

Between 1975 and 1980, 30 different state legislatures submitted 34 petitions to Congress concerning a Balanced Budget Amendment. Those states were Alabama, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Maryland, Mississippi, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and Wyoming. Since 1980, Alaska and Missouri have petitioned Congress for a convention for a Balanced Budget Amendment. If two more additional states were to petition, then the required two-thirds majority of states would be reached (34 out of 50 states) and Congress would be required to call a convention to propose a Balanced Budget Amendment.

Article XIV of the Utah Constitution

PUBLIC DEBT

Article XIV,  Section 1. [Fixing the limit of the state indebtedness — Exceptions.]
To meet casual deficits or failures in revenue, and for necessary expenditures for public purposes, including the erection of public buildings, and for the payment of all Territorial indebtedness assumed by the State, the State may contract debts, not exceeding in the aggregate at any one time, an amount equal to one and one-half per centum of the value of the taxable property of the State, as shown by the last assessment for State purposes, previous to the incurring of such indebtedness.  But the State shall never contract any indebtedness, except as provided in Article XIV, Section 2, in excess of such amount, and all monies arising from loans herein authorized, shall be applied solely to the purposes for which they were obtained.

Article XIV,  Section 2. [Debts for public defense.]
The State may contract debts to repel invasion, suppress insurrection, or to defend the State in war, but the money arising from the contracting of such debts shall be applied solely to the purpose for which it was obtained.

Article XIV,  Section 3. [Certain debt of counties, cities, towns, school districts, and other political subdivisions not to exceed taxes — Exception — Debt may be incurred only for specified purposes.]
(1)  No debt issued by a county, city, town, school district, or other political subdivision of the State and directly payable from and secured by ad valorem property taxes levied by the issuer of the debt may be created in excess of the taxes for the current year unless the proposition to create the debt has been submitted to a vote of qualified voters at the time and in the manner provided by statute, and a majority of those voting thereon has voted in favor of incurring the debt.
(2)  No part of the indebtedness allowed in this section may be incurred for other than strictly county, city, town, school district, or other political subdivision purposes respectively.

Article XIV,  Section 4. [Limit of indebtedness of counties, cities, towns, and school districts — Larger indebtedness may be allowed.]
(1) (a)  If authorized to create indebtedness as provided in Section 3 of this Article, no county may become indebted to an amount, including existing indebtedness, exceeding two per centum of the value of taxable property in the county.
(b)  No city, town, school district, or other municipal corporation, may become indebted to an amount, including existing indebtedness, exceeding four per centum of the value of the taxable property therein.
(2)  For purposes of Subsection (1), the value of taxable property shall be ascertained by the last assessment for State and County purposes previous to the incurring of the indebtedness, except that in incorporated cities the assessment shall be taken from the last assessment for city purposes.
(3)  A city of the first or second class, if authorized as provided in Section 3 of this Article, may be allowed to incur a larger indebtedness, not to exceed four per centum, and any other city or town, not to exceed eight per centum additional, for supplying such city or town with water, artificial lights or sewers, if the works for supplying the water, light, and sewers are owned and controlled by the municipality.

Article XIV,  Section 5. [Borrowed money to be applied to authorized use.]
All moneys borrowed by, or on behalf of the State or any legal subdivision thereof, shall be used solely for the purpose specified in the law authorizing the loan.

Article XIV,  Section 6. [State not to assume county, city, town or school district debts — Exception.]
The State shall not assume the debt, or any part thereof, of any county, city, town or school district except as provided in Article X, Section 5.

Article XIV,  Section 7. [Existing indebtedness not impaired.]
Nothing in this article shall be so construed as to impair or add to the obligation of any debt heretofore contracted, in accordance with the laws of Utah Territory, by any county, city, town or school district, or to prevent the contracting of any debt, or the issuing of bonds therefor, in accordance with said laws, upon any proposition for that purpose, which, according to said laws, may have been submitted to a vote of the qualified electors of any county, city, town or school district before the day on which this Constitution takes effect.