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From the Professional Division Forum column of the May 2004 Perspectives

A Tale of Two States: Wisconsin and South Carolina

George L. Vogt, May 2004

US MapWhen Bill Cronon asked me to appear on this panel, he knew that I had implemented major cuts at the Wisconsin Historical Society. He did not know that I was also a veteran of cuts in the Carter administration, two rounds of cuts in South Carolina, and now a little belt tightening at Hagley Museum and Library. To paraphrase Mae West, I've seen money coming and I've seen it going, and coming is better.

In South Carolina, Hurricane Hugo (1989) devastated not only the land but also the state's budget. Under Federal Emergency Management Agency rules, governments must cover approximately one-third of the relief costs, which can mean a sudden outlay of hundreds of millions of dollars. The "rainy day" fund was inadequate to the task, and the state, already impaired by a mild recession, scrambled to cut costs, causing significant retrenchment in state agencies. In the 1990s, a minor downgrade of the state's sterling bond rating (AAA) caused a major political flap and several years of cautious budgets to restore it. The state and its bond rating recovered quickly, so much so that when we built a new $20 million History Center for the state archives, the legislature paid for it in cash.

By contrast, Wisconsin's problems in large measure were self-inflicted. For more than a decade politicians bet on the outcome and won. They would pass biennial budgets with more expenditures in year two than known revenues, and each time the growing economy would produce the necessary "catch-up" dollars for a balanced budget. A rainy-day fund? Why? Then, in the recent recession, revenues tanked at the same time that health costs were rising, and the legislature reacted by paring state agency budgets. When Moody's downgraded the state's so-so bond rating, it caused hardly a ripple in the legislature and press.

There were similarities, however, in the ways the two states approached their crises. Politicians prefer across-the-board reductions as the tool of choice, rather than "pick-and-choose" or variable scale reductions because they invite less political flak and voters seem to find across-the-board cuts inherently fair. That leads to intense lobbying for amelioration of various cuts, and, occasionally, some success. In both states there was an absence of long-range thinking or concern for the unintended consequences of across-the-board cuts. For most legislators, a one- or two-year time frame (which coincides with the budget and their electoral cycles) is a "long time." And in both states, there was an irrational emphasis on the number of state employees rather than total personnel dollars. It is always tempting for politicians to legislate and crow about decreases in the number of "bureaucrats," and that often causes administrative difficulties in dealing with vacancies and position movements, even when funding is available from nongovernmental sources.

There were also differences. The Wisconsin Historical Society is partially funded by the state—about 60 percent of the operating budget—the rest coming from earned revenue, gifts and grants, and a small endowment income. The pattern in Wisconsin is toward less and less funding for the large educational and cultural institutions as a percentage of their budgets. Indeed, the former chancellor of the University of Wisconsin-Madison is fond of referring to the university as a "state-assisted" university. But as anyone in public administration will aver, declining support does not translate into greater local authority or looser strings; in fact, the opposite occurs. Wisconsin legislators, for example, wanted to cut budgets and tell us what not to eliminate (historic sites in their districts) or increase (university tuitions and fees). Sadly, Wisconsin continues to coast on its hoary Progressive-era reputation but to operate in a highly bureaucratic and constrained fashion, which makes it difficult for agencies to be flexible in times of economic strife.

In contrast, the South Carolina Department of Archives and History (SCDAH) is nearly 100 percent state-supported, and for many years operated the first- or second-largest state archives and records management program in the nation. In the early 1990s the government was keenly supportive of experimentation and funded numerous programs such as TQM that had transformed several of South Carolina's industries. Overall, though, most legislators were less than impressed by SCDAH's size and prominence; they wondered why a "small, poor state" should have something that big and good. And today, after more cuts, SCDAH is about half its former size.

For public institutions, the handwriting has been on the wall for decades: diversify your funding bases, charge for more services, and create development offices or suffer the consequences. Even with five years' head start in Wisconsin, we were ultimately unable to raise outside funding faster than legislators could cut it. I often wonder what might have been if all my predecessors over 150 years had devoted even a fraction of their time to endowment building. Perhaps more state cuts sooner. When the Wisconsin cuts came—and they continue—we found that they very nearly equaled what we had described during strategic planning as an unlikely worst-case scenario.

There are a number of short- and long-term consequences of the states' budgetary woes. Once lost, positions are difficult to reestablish even if funding exists because they affect the "body count." Donors are resentful of government for dropping its oar and are disinclined to help make up for government cuts. Wisconsin may have lost the largest private gift ever to American history when the legislature refused to express a nominal commitment to a major new state history museum. Many cultural institutions, including private ones, are turning to earmarks from the federal pork barrel as state support and endowment income drop. Perhaps the biggest unintended consequence, however, is the lack of support for preservation of the public record. State funders give scant attention (and virtually no dollars) to electronic records issues, which means that there already exist huge permanent holes in the documentation of government policies and programs.

I confess to pessimism. The combination of what Thomas Friedman calls federal "Budgets of Mass Destruction," rising costs of health care, the baby boomer debt load, a declining dollar, treasury instruments heavily backed by foreign capital, and the lack of political will to address these fundamental fiscal issues spells trouble sooner or later. Robert Rubin, our former secretary of the treasury, warns that a future economic meltdown is distinctly possible unless we reform.

—George L. Vogt is director of Hagley Museum and Library in Wilmington, Delaware. He has also served as director of the Wisconsin Historical Society and the South Carolina Department of Archives and History. Previously, he was director of the Historical Records Program of the National
Historical Publications and Records Commission at the National Archives.