U.S. states wrestle with budget woes

DES MOINES – Misery loves company, but company, says Holly Lyons, “doesn't make you feel less miserable.”

There's plenty of misery to go around among states facing fiscal challenges that, in many cases, are much worse than Iowa's, according to Lyons, the director of the non-partisan Legislative Service Agency's fiscal bureau says.

In Iowa, Gov. Chet Culver froze state hiring, limited travel and then made a 1.5 percent across-the-board budget cut to save an additional $90 million. His 2010 budget calls for a 6.5 percent cut – about $480 million. The moves already have resulted in furloughs for some state employees. The news is likely to get worse in light of the Revenue Estimating Conference's projection the state will collect $130 million less in the year ending June 30 and $270 million less than expected next year.

As bad as that sounds, it's not as bad as it is in Michigan or Colorado or Utah or, well, a lot of states.

“Everybody's in really bad shape and we're not quite as bad,” Culver's Chief of Staff Charlie Krogmeier says.

Arizona, California, Florida, Michigan, and Rhode Island are suffering most from the national economic crisis, according to the Nelson A. Rockefeller Institute of Government, but several states, including Connecticut, New York and New Jersey, are close behind.

For the first time since 2002, the total of all state tax revenues from all personal income, corporate income and sales declined, Rockefeller says. Overall state tax revenues fell by 5.6 percent when adjusted for inflation in the fourth quarter of 2008, compared to the same quarter a year earlier. Weaker sales tax revenue accounted for most of the decline, the institute says. Corporate income tax saw the sharpest decline at 9.3 percent, followed by sales tax and personal income tax at 5.9 and 0.4 percent, respectively, the institute says.

It found that North Dakota is about the only state “doing well.” It saw sales tax collections grow 14.4 percent in the last quarter of 2008 as opposed to the declines 35 states experienced, the Rockefeller institute reported.

North Dakota Alaska, Oklahoma, Texas and Wyoming were the only states to add jobs from October through December. Employment fell in the other 45, the institute says.

In Michigan, Democratic Gov. Jennifer Granholm has proposed cutting $670 million, closed two prisons and issued an executive order to possibly parole 12,000 inmates who have served their minimum sentences. She's also proposed a $59-per-pupil cut in state aid to K-12 schools and a $100 million cut in higher education funding.

California was unable to pay state employees, including teachers, for a time and was making taxpayers wait for their income tax refunds.

In California, the cuts to education were more than $8 billion, Rep. Scott Raecker, R-Urbandale, says.

“Not that you can compare our budget to California's, but our general fund budget is just $5.8 billion,” the ranking Republican on the House Appropriations Committee says.

It's hard to compare any state to another, Senate Appropriations Committee Chairman Bob Dvorsky, D-Coralville, says.

Still, Dvorsky says he often thought he'd like to be on the appropriations committee in Alaska where the state collects oil revenues. This year, however, the 50th state is tapping its reserves to the tune of $1.2 billion – with a B – to balance the state budget.

As painful as the budget cuts facing Iowans are, Dvorsky and Raecker agree the situation is not as dire as what other states are going through. The rainy day funds the state has built and the law limiting spending to 99 percent of revenues has served the state well, Raecker says. “It gives us options others don't have.”

Those reserves and a history of “pretty responsible budgeting no matter who's in control,” have prevented Iowa from sinking into the budgeting quagmire facing Michigan, for example, Dvorsky says.

Iowans' innate neighborliness helps the state get through tough budget times, Krogmeier says.

“Compared to some states, in Iowa everybody in the system – local, county and state – knows each other,” he says. “If not a direct personal relationship, they at least know each other. People in Cedar Rapids know enough about Davenport there is a sensitivity and a ‘we're all in it together' feeling” that helps leaders work through a bad situation.

The state and Iowans will not get through this budget unscathed, however, Dvorsky warns.

“There will be pain,” he says. “There will be furloughs and layoffs and programs reduced or eliminated.”

He tries to keep tabs on what other states are doing to deal with lower revenues, “but there's never a silver bullet that solves all, or even a majority, of your problems,” Dvorsky says.

Some states are digging deep in their arsenals of budget cuts, program eliminations, layoffs and tax hikes to find a silver bullet.

New York's governor has proposed 119 new or increased user fees, Oregon may raise the death certificate fee and Wisconsin has started taxing Internet downloads.

Several states are looking to turn personal vice into a virtue for state coffers. A dime-a-drink surcharge is on tap for Californians, and Kentucky plans to raise its alcohol tax. New Jersey will follow suit, but give Joe Six-pack a break by excluding beer from the 25 percent increase in alcohol taxes.

Arkansas has increased its cigarette taxes by 56 a pack and California's tax is now nearly $3 a pack.

And in Nevada, in what might be considered the ultimate sin tax, lawmakers have proposed a $5 brothel tax.

Among other measures under consideration, according to the National Council of State Legislatures, are:

Budget cuts

Minnesota – proposed 25 percent cut in state aid to local government

Alaska – cut renewable energy spending by $100 million; cut state payment to retirement programs by $166.5 million

Louisiana – may close all historical sites except on weekends

Utah – a 7 percent across-the-board cut plus nearly 19 percent cut to state parks

Courts & Corrections

Colorado – governor proposed closing two prisons, delaying the opening of another

Florida – 280 court workers and 68 parole and probation officers laid off

New Hampshire – proposed moving 200 prisoners to supervised release

Oregon – courts closed on Fridays

Washington – considering reducing sentences by 50 to 60 days, save $40 million by reducing community supervision, allowing 4,300 misdemeanants to go unsupervised

Education

Alabama – cut the Education Trust by $705 million or 11 percent, 10 percent cut in community college budgets

Colorado – proposed $125 million cut to K-12

Florida – 15 percent cut to K-12

Michigan – proposed $100 million cut to higher education

New York – 14 percent tuition hike proposed

Utah – reduced K-12 funding 13 percent

Layoffs

Arizona -- laid off 1,000 tax auditors, benefit screeners and other employees

Georgia – furloughed 25,000 employees

Maryland – 5-day furloughs for 67,000 state employees

Michigan – called for laying off 1,500 employees

Rainy Day Funds

Virginia -- $490 million

Miscellaneous

Arizona – eliminate child-care subsidies for 15,000 children

Connecticut – seeking $295 million in concessions from state employees

New Jersey – proposed cutting $500 million in homestead rebates

Virginia – borrow to pay for $400 million in construction rather than financing them pay-as-you-go

Gambling

Alabama – proposed expanded bingo and slots

California – voters will decide whether to allow the state to borrow $5 billion against future lottery proceeds

Florida – proposed expanded gambling compact with Seminoles to raise more than $140 million

Illinois – considering allowing free alcoholic drinks on riverboat casinos to encourage more gambling

Maine – may expand casino hours to include Sunday morning

Fuel Taxes

Idaho – may raise gas tax by 2 cents a gallon over five years and eliminate the 10 percent exemption on ethanol

Massachusetts – 19-cent per gallon hike considered

Taxes

Massachusetts – considering increasing sales tax and income tax by undetermined amounts

New York – may eliminate sales tax exemption on clothing costing less than $110, may raise taxes on those making $250,000 a year of $500,000 a year

Wisconsin – hike corporate taxes $257 million, raise taxes on those making more than $225,000 a year

Other Revenue Sources

Colorado – may bring back a $10 or $15 fee for background checks on would-be gun owners

Massachusetts – 5 percent tax on sweetened soft drinks

Michigan – raise park pass from $24 to $28

Oregon – raise fishing license fees

Wisconsin – raise hunting license fees; implement taxes on meat processors of 14 cents per cow and pig, 10 cents per calf and 1 cent per chicken