Budget Crises Worsen in Many States

Cutting services and raising taxes. Firing civil servants, freeing inmates early, squeezing health care for poor families. In almost every state, the options facing governors and lawmakers these days are grim.

State governments that went on a spree of tax cuts and higher spending in the flush 1990s now find the bills are due. And with less money to spend, politicians must make difficult choices with implications far beyond the statehouse.

The pain will spread in the coming year, but hardship is already evident — for state workers laid off in Connecticut, for Medicaid patients deprived of services in Oklahoma, for homeless families turned away from overflowing shelters in Massachusetts.

"I was shocked — I didn't know prosecutors were going to be laid off," said Carrie Bernier, 32, who has a young daughter and prosecuted domestic violence cases in Stamford, Conn., until her layoff this month.

The decisions legislators make in the months ahead will affect millions of Americans beyond state employees and poor people who depend on government for medical care.

Most will likely feel the impact: drivers forced to stand in longer lines to renew licenses, parents saddled with higher college tuition bills, smokers and drinkers paying more.

Already, some states have been forced to make one of the most painful cuts of all: to education. With war looming as a possibility, no one knows how much worse things can get.

As 24 new governors take office, their budget options are limited because many states' reserve funds have been exhausted and there are no more quick-fix financial gimmicks.

"States are facing a perfect storm with deteriorating tax bases, an explosion of health care costs, coupled with a virtual collapse of capital gains tax revenues and corporate profit taxes," said Raymond Scheppach, executive director of the National Governors Association.

According to the NGA, states are short a total of $50 billion this fiscal year (ending June 30 in most states) and up to $70 billion next year — the worst financial crisis for the states at least since World War II.

A handful of states are avoiding major difficulties. Wyoming and New Mexico are flush because of a natural gas boom; Vermont averted a shortfall by spending late '90s surpluses on one-time projects rather than recurring programs.

Among the hard-hit states, California leads the pack, with a projected shortfall of $34.8 billion for an 18-month span of 2003-04.

To pay the bills, Gov. Gray Davis (news - web sites) has proposed $8.3 billion in tax increases and $20.7 billion in budget cuts. School spending alone would be slashed more than $5 billion.

One likely target of California's austerity drive is a low-income housing project to be built starting this summer in Santa Barbara.

"It's devastating that the people who need the money the most are the ones who lose it first," said Sister Alicia Martin, head of a Roman Catholic charity that donated land for the project.

Reasons for the crises vary — a drop in tourism hurt Florida and Hawaii; in New York, the Sept. 11 attacks caused widespread job losses.

Yet some pivotal factors apply almost everywhere. Lawmakers and governors eagerly — some critics would say recklessly — spent the surging state revenues of the late 1990s. Though some put money aside for the long-expected downturn at the boom's end, they were unprepared for the length and breadth of the financial beating.

Even as recession set in, the cost of Medicaid and other health programs — which account for about 30 percent of state spending — continued to rise. Caught in a spiral of lower revenues and higher bills, more than 40 states now face budget shortfalls.

Long-term solutions may require major changes to Medicaid — the taxpayer-financed health care system for low-income Americans — as well as steps to help states cope with tax revenues that boom, then bust. Already, virtually every state is cutting back on Medicaid coverage.

For additional relief, many states have raised cigarette taxes. Maryland's new governor, Robert Ehrlich, wants to bring slot machines into his state. Some governors hope to collect sales taxes on Internet transactions.

In Oregon — reeling from the nation's highest jobless rate — voters are being asked to make a tough choice on their own: They will decide in a special election Tuesday whether to raise their state income taxes by 5 percent for three years.

If voters reject the increase, lawmakers could be forced to cut more than $300 million from state programs.

The tough times have politicians nationwide venturing off traditional partisan paths. Several Democratic governors are contemplating deep cuts to social programs; two Republican governors, Mike Huckabee of Arkansas and Dirk Kempthorne of Idaho, jolted lawmakers of their own party by proposing sales tax increases.

More than 1,500 state jobs have been eliminated in Arizona, about 300 in Nebraska. The nation's only state anti-pornography czar lost her job due to budget cutting in Utah.

Many states are reluctantly reviewing the huge sums they spend on schools. Illinois lawmakers broke a string of funding increases for K-12 schools last year; tuition is expected to rise at least 10 percent at Michigan's state colleges this fall.

In several states, prison construction projects have been postponed. And in Kentucky, prosecutors were enraged when Gov. Paul Patton ordered the early release of 567 inmates in December. Yet similar proposals for early releases — or more lenient sentencing — are surfacing in other states.

Patton said it was up to lawmakers to choose among the unpalatable options for coming up with $509 million.

"The problem, quite frankly, is nobody wants to bell this cat," said the House Democratic floor leader, Greg Stumbo. "There are two possible solutions, cut spending or raise revenue. Nobody really wants to be the father of either one of those proposals."

I reckun the Congressmen and Senators ought to get their butts in gear and pass Presdent Bush's tax package..NOW!!!!

We may all live in different states but we all share a common keel.

The early releases of prisoners is the usual political trick of cutting important stuff first so that voters will be scared into accepting higher taxes. Many states increased spending by huge amounts in the 90's. Cutting back on those increases would be easy, but politicians hate spending cuts.

"Cutting services and raising taxes. Firing civil servants, freeing inmates early, squeezing health care for poor families"

B.S.
the county i live in has 32 free clinics for illegal mexicans...
anyone wanna bet that they are gonna close any of em???
besides; the demonicRATS n gov gray dufuss, are gonna tax their way to PROSPERITY; problem solved...

Oregon will see even higher joblessness if they pass a tax increase. You can't tax your way to prosperity. It's ridiculous to think it works that way.

"It's devastating that the people who need the money the most are the ones who lose it first," said Sister Alicia Martin, head of a Roman Catholic charity that donated land for the project.

Amazing..the tax exempt complaining that there is not enough tax revenue!

"It's devastating that the people who need the money the most are the ones who lose it first,""

That's the point Sister Alicia..IF YOU MAKE THE CUTS HURT the people instead of the bureaucrats then the people will squeal nice and loud to be taxed MORE.

They ALWAYS cut kids services first, then the old folks, then the police and fire.

6 posted on 01/27/2003 7:44:54 PM PST by GailA (Throw Away the Keys, Tennessee Tea Party, Start a tax revolt in your state)

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