This could really save Rell and the Democrats from budget Armageddon. What should be done with it?
Well... we have an awful lot of debt. In fact, we're one of the worst states in the country when it comes to our bonded debt (currently $13 billion). We should try to pay down as much of that as is feasable, to save ourselves money in the future.
The teachers' retirement program is dangerously underfunded, as is the retirement program for state employees:
The actuarial value of the teachers pension fund assets is about $9.847 billion, while the actuarial accrued liability is $15.071 billion, according to the nonpartisan legislative analysts. That leaves an unfunded liability of about $5.224 billion, or 34.7 percent of the total. In other words, the state is funding 65.3 percent of what it needs for the pension fund.
The state funds an even smaller percentage of the state employees pension. According to OFA, the actuarial value of the state pension fund is roughly $8.230 billion, while the actuarial accrued liability is about $15.129 billion, leaving an unfunded liability of $6.890 billion. That means the state funds just 54.5 percent of what's necessary to cover the total. (Breen)
Cities and towns desperately need money, too, and it's almost certain that some of the surplus will go their way. Both Rell and the Democrats support sending at least $100 million to municipalities.
I'm very relieved to see that no one is talking about tax cuts (at least, not yet).
If the state government is smart about this surplus, it could really be a boon. Let's try to learn from the disaster that the federal government made out of their surplus, and manage this one wisely. Paying down the debt and more fully funding retirement programs is a good way to ensure that we'll be on firmer financial footing in the future.
Breen, Tom and Keith Phaneuf. "So there's a surplus -- what about state's debt?." Journal-Inquirer 9 May, 2005.