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States Grapple with Tight Budgets, Growing Deficits

January 12, 2010 at 12:00 AM EDT
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As legislators return to work after the holidays, a troubling picture is emerging in almost every state in the nation. Budget woes and big deficits will mean tough decisions for lawmakers. Jeffrey Brown reports.
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JEFFREY BROWN: That follows our look at budget woes in states across the country, as legislators return to work and face even bigger deficits and tough decisions in 2010.

The Center on Budget and Policy Priorities, a nonpartisan group, projects potential shortfalls of $350 billion nationwide over the next two years, with every state except Montana and North Dakota facing fiscal trouble.

We take our own snapshot now with the help of PBS correspondents in New York, Colorado, Louisiana, Oklahoma, Idaho, and California.

JULIE PHILIPP: In Rochester, New York, I’m Julie Philipp.

Snow isn’t the only thing piling up here. So is the state deficit. The forecast? A current year budget gap of $500 million is expected to grow to $9 billion by the end of the next fiscal year, the result of years of overspending and one-time fixes. Democratic Governor David Paterson, considered a lame duck by some political observers, is having trouble getting the state legislature to agree on significant spending cuts.

That’s despite the fact the legislature is controlled by his own party. Things could freeze up even more, since every state lawmaker is up for reelection this year.

Robert Duffy is mayor of the city of Rochester.

ROBERT DUFFY: Cutting spending means making very unpopular decisions. That means jobs being cut. It means some services being cut. It means bureaucracy being minimized and cut through. Those things have to happen. They’re not — they’re not easy. It’s painful. But it has to happen. And I think, politically, I think everybody has to have the strength to do that.

JULIE PHILIPP: In December, as tax collections continued to decline, the state started falling behind on payments to Rochester, as well as other municipalities, schools and nonprofit organizations across New York. And Mayor Duffy is expecting a lot less state money in 2010.

Last year, at budget time, federal stimulus money and a long list of new state taxes and fees helped push the fiscal crisis back. Now there are fewer options.

GOV. DAVID PATERSON, D-N.Y.: This is a winter of reckoning.

JULIE PHILIPP: Governor Paterson is warning, deep cuts are the only way out of this storm.

TOM BEARDEN: I’m Tom Bearden in Colorado, where the state legislature goes back into session tomorrow facing a budget shortfall of historic proportions, $600 million between now and the end of the fiscal year in June, a cumulative $1.5 billion by the end of the next fiscal year.

Already, state employees have been forced to take unpaid furlough days. Some state prisoners have been released early. And mental health care services have been curtailed.

On top of all of that, the state has one of the toughest taxpayer bill of rights laws in the country. It limits the growth of the state budget and how much revenue the state government can keep.

Last week, Governor Bill Ritter announced he would not seek reelection, and said that would give him more freedom to deal with future cuts. But already on the table are potentially draconian cuts for Colorado’s institutions of higher learning. Public schools face cuts of about 6 percent, and retirement benefits for public employees, like teachers, may be reduced.

Plummeting tax revenues also have had a huge impact on the nation’s largest ongoing mass transit project, the FasTracks light-rail system. Voters approved a sales tax increase in 2004 to pay for it. But costs ballooned and revenue fell far short of projections. Voters will probably be asked to double that tax to finish construction on schedule.

PAULETTA TONILAS, spokesperson, Regional Transportation District: Right now, what we’re saying is, to get the whole thing built out by 2017, our original schedule, it’s going to take another four-tenths-of-a-percent sales tax increase. If we don’t get more revenues into the program, then it’s going to be after 2035 that the whole FasTracks program is realized.

JULIE PHILIPP: Local pundits say asking for a tax increase this fall in the midst of a recession could be a very tough sell.

SHAUNA SANFORD: I’m Shauna Sanford with the Louisiana Public Broadcasting.

Experts have called Louisiana’s budget crisis the worse they have seen is more than two decades. The 2009 tax revenues were down, leaving the state with less money to spend in 2010 and a nearly $250 million hole in the budget. This comes on the heels of a $1.6 billion cut last year and projected shortfalls to the state general fund over the next two years, totaling nearly $3 billion more, as federal stimulus dollars go away.

Deep cuts will have to be spread across many state agencies, including $84 million from higher education and $108 million from health care. Republican Governor Bobby Jindal says, hard decisions will have to be made within the coming weeks and months. The bottom line, he says, is that state government will simply have to tighten its belt.

By law, the governor must balance the state budget and can mandate 3 percent cuts to state agencies without legislative approval. While the governor and lawmakers figure out what they will do to handle the state’s budget woes, the governor says there are two things he will not do to fix the problem: use the state’s rainy day fund or raise taxes.

LORI RASMUSSEN: I’m Lori Rasmussen in Oklahoma City.

In a state where energy reigns supreme, falling oil and natural gas prices have led to a budget shortfall of more than 18 percent, the biggest budget gap in the nation. That has forced state agencies to furlough employees and eliminate programs and services. Among the casualties are deep cuts to a senior nutrition program, elimination of education and reentry programs for prison inmates, a gang prevention and intervention program that reduced drive-by shootings by as much as 61 percent, and a reduction in services to victims of domestic abuse.

Schools in Oklahoma are cutting bus routes and trimming administrative and support staff. The cuts to mental health services for low-income adults brought that agency head to tears.

TERRI WHITE, Oklahoma Department of Mental Health: All the folks who are here know that I actually do cry about these things, because these are real — these are real people that we’re looking at. And, sometimes, we miss that at the capitol. And I know that you all struggle with a lot of tough decisions, but what I want to tell you is, if this committee doesn’t stand up for this agency, nobody will.

LORI RASMUSSEN: The legislature goes back into session the first week of February, and the budget will be the number-one item on the agenda.

How lawmakers will resolve the budget shortfall remains a mystery. Raising taxes is, for all practical purposes, off the table. In Oklahoma, all new taxes must be approved by a vote of the people or by a supermajority of the legislature. And that’s an unlikely vote in an election year.

THANH TAN: In Boise, Idaho, I’m Thanh Tan.

The legislature is back in session and grappling with questions over the proper role of state government, especially when there’s a $40 million hole to fill just halfway through this fiscal year and possibly another $83 million in cuts to stay out of debt next year.

MAN: So we’re compiling a report.

THANH TAN: On Monday, inside the newly renovated capital, Governor C.L. “Butch” Otter told Idahoans they can expect no tax increase, instead, sweeping changes to state government.

GOV. BUTCH OTTER, R-Idaho: Those changes are meant to be permanent, based upon a philosophy that government that recognizes our responsibility to individual Idahoans, rather than to government itself.

THANH TAN: To save $10 million, Otter is pushing to close the Idaho Parks and Recreation Department, in favor of a system funded by user fees and maintained by other departments.

The governor’s recommendations include a four-year plan to eliminate all state funding for seven agencies and commissions, including the department I work for, Idaho Public Television.

And, for the first time, public schools face nearly $29 million in midyear budget cuts. The handful of Democrats in this legislature oppose that proposal.

KATE KELLY, D-Idaho, Idaho senate minority leader: That means literally closing schools one day a month. And that is a huge concern at a time when we need our schools more than ever.

THANH TAN: The governor contend, education already takes up more than half the budget. There’s no choice.

GOV. BUTCH OTTER: I say, where else would you have me cut?

THANH TAN: The Senate president pro tem acknowledges, this will be a contentious year.

ROBERT GEDDES, R-Idaho, Idaho senate president: We can only spend the available revenues that we have to us.

THANH TAN: He’s talking about Idaho’s constitutional mandate to balance the budget. It may be the key to a legislative session everyone wants to keep as short as possible.

SPENCER MICHELS: I’m Spencer Michels San Francisco.

It’s Governor Schwarzenegger’s last year in office, and, from all accounts, it won’t be pretty. California is facing a $20 billion budget deficit over the next 18 months, that on top of last year’s even larger deficit. The governor came in to office vowing to sweep Sacramento clean and to promote bipartisanship. But most observers agree, that hasn’t happened.

The governor is asking for nearly $7 billion in federal funds. But there’s no guarantee he will get it. And he is asking California’s congressional delegation to vote against health care reform because he says California can’t afford it.

GOV. ARNOLD SCHWARZENEGGER, R-Calif.: It is not reform to push more costs on the states that are already struggling, while other states are getting sweetheart deals.

SPENCER MICHELS: He wants a constitutional amendment that will guarantee schools will get more money than prisons.

GOV. ARNOLD SCHWARZENEGGER: Spending 45 percent more on prisons than universities is no way to proceed into the future.

SPENCER MICHELS: State employees already furloughed without pay three days a month may be in for more non-paid days off.

All of this promises a continuation of the partisan battles in the legislature, which has been unable to solve the budget mess. That’s because it takes a two-thirds vote of the legislature to pass a budget. And that allows the minority party, in this case, the Republicans, the ability to hold up the wheels of government.

The governor says that the recession is mostly over, but the picture for California remains bleak.

JEFFREY BROWN: And we have more about how local governments are handling the fiscal crisis on our Web site, including an interview with Susan Urahn of the Pew Center on the States.