Weekly Wrap: Governors Offering Dire Spending Plans

By: - December 18, 2009 12:00 am

One by one, America’s governors are beginning to prepare their constituents for a dark year ahead, even as the economic recovery gets under way.

With many legislatures convening in a few weeks, governors are offering bleak budgets for the next fiscal year calling for deeper spending cuts and, in some cases, tax increases.

Their despair is plain. They say they already have cut spending to the bone and do not want to have to increase taxes on people still suffering from the effects of the recession. But tax revenues are still in free fall in many states, and the federal economic stimulus money is running out.

“Let me be very clear. I do not support this budget. As required by law, it is balanced. For me, it is unjust,” Gov. Christine Gregoire (D) of Washington said after proposing a spending plan that closes a .6 billion gap without raising taxes but that slashes dozens of programs from education to health care. She vows to submit another budget in January restoring many of those services through tax increases.

A Republican governor, Mitch Daniels of Indiana, said he has reached the only remaining option to avoid a shortfall in the 2010-2011 budget: trimming K-12 education. “We have already cut state agencies by 20 percent and higher education by 6 percent. We are now forced to our last resort.”

On it goes. Arizona Gov. Jan Brewer (R) hauled the Legislature into a special session Thursday (Dec. 17) to consider temporarily increasing the sales tax to avoid further cuts to education, health and human services and public safety. Nevada Gov. Jim Gibbons’ (R) budget director told state agencies to prepare for cuts up to 10 percent. Oklahoma Gov. Brad Henry (D) had essentially the same message for his administration in ordering an immediate 10 percent cut: “No one relishes the idea of implementing further cuts to state programs, but we really have no choice because of the fiscal realities we face,” Henry said, referring to double-digit percentage drops in revenue.

The governors of New York and Rhode Island slashed state aid to local schools and governments. The New York Times sided with Gov. David Paterson (D). “The Legislature, in denial, is refusing to do the hard work that’s needed,” said a Dec 16 editorial. “Unless there are serious changes in the way New York spends and raises money, the state could be facing a billion deficit next year.”

Wyoming Gov. Dave Freudenthal (D) proposed a budget earlier this month cutting spending by million. “The world is different,” he said in his budget message.

One encouraging development this week in the state fiscal crisis that bears watching came from Maryland and Massachusetts, where officials reported improving tax collections. “We are, in fact, in a recovery mode and a fairly brisk one at that,” David Tuerck, executive director of the Beacon Hill Institute at Suffolk University, told The Boston Globe . Despite higher than expected revenue in Maryland, Gov. Martin O’Malley (D) still said the state would have a substantial budget shortfall in the coming fiscal year and would need additional federal aid.

Alaska Gov. Sean Parnell (R) bucked the trend. On Monday (Dec. 14), he proposed an 8.6 percent increase in state spending in the next fiscal year because of projected rises in oil prices. Last year, lawmakers cut the budget by 7 percent.

Then there’s North Dakota Gov. John Hoeven (R), who called a news conference Tuesday (Dec. 15) to say that the state had so much money that individuals and businesses would average in tax savings in 2009 from cuts enacted by the Legislature. North Dakota is rare among states in that it is not currently experiencing a budget shortfall.

The sprawling CityCenter resort and casino opened Wednesday (Dec. 16) in Las Vegas, which offers a glimmer of hope that the gambling mecca will recover from the recession sooner than expected.

As the Pew Center on the States documented in its recent report , “Beyond California: States in Fiscal Peril,” Nevada has been hit hard by the recession because its economy is overly dependent on tourists. The .5 billion center, set on 67 acres along the famed Strip, employs 12,000 people.

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Stephen Fehr

Stephen Fehr is a senior officer with Pew’s government performance portfolio. He is a lead writer on many of the products generated by the portfolio, specializing in state and local fiscal health.