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California Leads States Facing Deepening Budget Crises

Several states are struggling to find solutions for deep budget gaps as a new fiscal year begins. Jeffrey Brown examines the budget picture across the country.

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    Financial crises spread deeper at the state level today as most state governments began their new fiscal year. Some states were unable to pass budgets, while others voted on 11th-hour measures to stay afloat.

    Jeffrey Brown, with PBS correspondents around the country, has our lead story report.


    Across the country, from one state legislature to another, today's budget deadline brought boisterous debates over taxes, threats of spending cuts, painful choices made or delayed.

    Some legislatures — Wisconsin's, for example — reached last-minute agreements.

    But elsewhere, the specter of government shutdowns and cutbacks loomed. States on the edge included: California, Illinois, Pennsylvania, Ohio, North Carolina, and Connecticut.

    California, as always, led the way, though not in the direction it wanted, with a nearly $25 billion deficit and no agreement in sight.

    This afternoon, Governor Arnold Schwarzenegger declared a "fiscal emergency" as the impasse continued between Senate Democrats and their Republican counterparts.

    DARRELL STEINBERG (D), California state senator: The Republicans have said no new taxes. We have said we would not decimate the social safety net.

    GOV. ARNOLD SCHWARZENEGGER (R), California: I think it is also important that they don't send me a budget that has any tax increases in there, because I will also veto that.


    NewsHour correspondent Spencer Michels is in San Francisco.

    SPENCER MICHELS, NewsHour correspondent: California cities like San Francisco are trying to figure out how to support the social safety net when most of the money for those programs comes from the state. And the state budget is in the worst shape it's ever been.

    The state controller intends to issue IOUs to help pay the state bills and for income tax refunds. At the same time, Wall Street is considering lowering its credit rating for California, a rating that is already very low, and that could have national implications.

    There's an ideological split between the Democrats and the Republicans in California that has contributed mightily to this crisis. The Republicans have vowed not to vote for any new taxes; the Democrats say they want some.

    But both sides agree major cuts are necessary. Those cuts will hurt many state programs, including programs for the homeless, the poor, the disabled, and schools.

    No one is exactly sure how to solve this problem. There may not be a solution. The one bright spot is that a state constitutional convention may be called to try to look into the budget problems, the systemic problems that have plagued this state for years.