LEE HOCHBERG: Police in the small Washington State town of Sultan get 15,000 calls a year, enough to keep them more than busy, but when we visited earlier this month, Chief Fred Walser wasn't doing police work.
SPOKESMAN: Is the screen working this time?
SPOKESMAN: We've got a bad connection between the monitor and the base of the C.P.U. So that when you open up this area...
LEE HOCHBERG: Voters cut the state vehicle tax two years ago, and ever since then, sultan's police officers have had to do their own repairs on police computers and even on the cars themselves. Walser says there's no cash to hire technicians or mechanics.
POLICE CHIEF FRED WALSER, Sultan, WA: The only way we can survive is to figure ways to save money; every dime we save by doing our own work translates into equipment we're able to buy to keep us functional.
LEE HOCHBERG: The force has cut two of 12 officer slots and two- thirds of its training budget.
POLICE CHIEF FRED WALSER: I think it's nonsense. We're hired to be cops, police officers, and to do the best job we can. We put our life on the line for our citizens, and to come in here and have to maintain this equipment... this is not what we were trained and hired to do. But it is a choice we had to make because of money issues.
LEE HOCHBERG: Money issues in towns like Sultan may get worse. Since the tax rollback in 1999, the state government has been supplanting small-town budgets like Sultan's, but with recession now pushing Washington's unemployment over 7%, the state says it has no more money to help. The Washington State economy has been hammered by a slowdown at the Boeing Company and by the demise of more than a dozen dot-coms. The state government faces a budget shortfall of $1.2 billion. Nationally, the economic slowdown has 40 state governments facing a combined shortfall of more than $40 billion.
GOV. GARY LOCKE, Washington: Well, this is very, very... well, this is very severe. We're really talking about roughly a 20% budget deficit.
LEE HOCHBERG: In December, Washington's Democratic governor, Gary Locke, announced a controversial budget for lean times. Though it spares state public schools, it's heavy on other service cuts, eliminating 30 programs and hundreds of state jobs. In a state, which already has one tax-restriction measure on the books and another on the ballot, the governor refuses to consider raising sales or business taxes to replace revenue.
GOV. GARY LOCKE: In tough fiscal times, when so many thousands of people, tens of thousands of people have lost their jobs, this is not the time to be raising taxes.
LEE HOCHBERG: The proposed program cuts are a bitter pill. Pharmacists howled over Locke's plan to save $35 million by reducing the amount the state reimburses them when they sell discounted prescriptions to low- income customers on Medicaid. More than one-quarter of the customers at Sultan's tiny pharmacy are low income. Pharmacist Greg Hovander says his profits already are so low, a reduction in his Medicaid reimbursement will leave him no choice but to turn away his low- income customers.
GREG HOVANDER, Pharmacist: Boy, that would be a tough thing. I wouldn't want to do that, but I would if I had to. I've done everything on a shoestring to try to make things meet, and I can't.. the shoestring is only this thin, and any thinner, it's going to break.
LEE HOCHBERG: Just about every cut the governor suggested has raised someone's wrath, from his plan to eliminate the state library to his proposed cutbacks in Medicaid payments to nursing homes and the developmentally disabled. Republican lawmakers were incensed about Locke's call for prison cuts. The governor recommended some prisoners, excluding sex offenders, be released earlier. For Locke, it's a chance to reevaluate the state prison system.
GOV. GARY LOCKE: The cost of prisons and building prisons and hiring guards, 24 hours a day, seven days a week, is incredibly expensive. The incarceration rate in the United States is among the highest in the world. We need more intelligent policies with respect to incarceration.
LEE HOCHBERG: But Republicans say that move to save $700,000 would leave the state soft on crime. Representative Ida Ballasiotes' daughter was murdered 14 years ago by a prisoner on work release.
IDA BALLASIOTES: I frankly don't see letting out a bunch of people because it's a way to save money. That's terrible policy. In the scheme of our budget, billions of dollars in the budget, $750,000 is essentially a pittance.
SPOKESMAN: Take two. Mark.
LEE HOCHBERG: And the budget woes have spawned a debate on the purpose of state government. Locke's budget eliminates the state's film office, a small item of $375,000 that supporters say generates $50 million in movie business a year in Washington State. Filmmakers say the office is the type of moneymaking initiative government should embrace in lean economic times.
SPOKESMAN: That's a cut.
THOM HARP, Cinematographer: There's no one who's going to tell Hollywood that we have the crew, the talent, the location, the labs, the rental services, and as a result, all those... if they don't have the work to keep them going, they'll close. So that affects tons of workers.
LEE HOCHBERG: But Locke says, while he fought to create the office years ago, the state can't be in the movie business in times like these.
GOV. GARY LOCKE: Can we really say that if we eliminated the film office completely that there would be no films shot or produced in the state of Washington, especially when some other cities in the state of Washington have similar film offices? It's a question of, you know, what are the roles and responsibility of the states given responsibilities and functions that are now being carried on by other governments, whether at the local level or at the county level?
SPOKESMAN: Somewhere in America, moments from now, there could be a new multimillionaire!
LEE HOCHBERG: While Locke rejects new general taxes, he does seek added revenue from discretionary behavior. He proposed Washington join the Big Game, a multistate lottery that could bring the state $30 million per year.
He also wants increased taxes on gambling and a 30-cent-per-bottle tax on hard liquor, but critics say more gambling is the last thing the state needs in hard times.
CLYDE BALLARD: Why don't we put slot machines in every grocery store, in every restaurant, in every place in the State of Washington? Because if we want to really raise money, we should put slot machines everywhere. Why not use it to get $300 million or $500 million a year?
GOV. GARY LOCKE: Do they prefer that we raise taxes instead and cut deeper into education and human service programs? I think not.
LEE HOCHBERG: Governor Locke says he expects the state's recovery to be slower than the nation's because of its reliance on Boeing and high-tech companies. State forecasters in recent days reported that the state budget deficit may actually be $100 million worse thanks to lower-than-expected tax collections and higher social service costs. Some in the legislature say, in the end, raising taxes may be the only answer.