The day of reckoning has finally arrived as governors and state legislatures struggle to close budgetary gaps that have been mounting for years. Shrinking revenues, underfunded pension liabilities, increasing healthcare costs, and expanding entitlement program costs have blown large holes in the budgets of states large and small. Fiscal watchdogs have been predicting for quite a long while that states would eventually have to make tough decisions which would dramatically impact the expectations and benefits of public employees, retirees, and recipients of social programs. Were it not for the current economic climate, state officials probably would not be so intent on implementing drastic changes in their revenue and cost structures. The economic uncertainty and fragility are perhaps a blessing in disguise because the hard financial decisions must be made sooner rather than later. Some states have already waited too long and passed the buck too many times. Whereas states used to be able to depend on cash infusions from the federal government, that is a thing of the past because our federal coffers are depleted and in the red, and will be for a very long time. These are moments in history that will reflect whether policymakers can summons enough courage to restore the fiscal health of their states to a point that will once again signal prosperity and stability for future generations.

The path toward fiscal soundness at the state level will require equal sacrifices from all public sector beneficiaries as well as a hard and honest review of all public expenditures. The unfortunate realities of the current fiscal crises is that expenditures in areas such as public education will be largely impacted as they account for a large percentage of the overall budgets and have been expanding dramatically for years. Regardless of the shouts for not cutting education spending, states must reign in the waste and inefficiencies that continue to cause too much money to be spent on school administrative costs versus classroom costs. While school infrastructure and curriculum costs do justifiably warrant increased levels of spending, nonessential personnel and excessive overhead costs need a hammer applied to them. We all support funding initiatives that recruit, train, and compensate highly competent classroom teachers, and we fully comprehend the need to elevate how and what students learn. However, most people want honest and open dialogue and negotiations among all education stakeholders about the real costs and benefits of public education finances.

There’s no more time for posturing and politicizing about classroom costs, teacher compensation, and school renovations, to name a few. The timidity that allowed policymakers to procrastinate about making hard and painful cuts in social programs and public employee benefits packages will no longer suffice because everyone’s back is against the wall. Benefits and pay cuts will likely affect existing public employees as well as retirees. Everything’s on the table now – collective bargaining rights for public employees, benefits programs for those who are currently employed and retired, and the accounting for the liabilities which underlie public pension obligations. Across the board scale-backs will be more palatable if the public sees that everyone is sharing in the austerity measures. The challenge for governors and legislators alike is to sacrifice political allegiances and politics for sound fiscal policy decisions. These times demand leaders and decision-makers who can resist the temptation to do nothing substantive but exhibit the kind of boldness necessary to produce fresh new ideas that will transform state fiscal policies.