The arithmetic is simple. It is the politics of balancing the bottom line in a recession that gets complicated, which is why Illinois is just one of nine states to have blown its deadline for adopting a new budget.
The results have been governmental turmoil and acrimonious finger-pointing from one end of the country to the other. In several states, partisanship over unrelated budget issues has made the balancing act even tougher and more drawn out.
As Illinois` Republican Gov. Jim Edgar and Democratic legislative leaders last week confronted the first missed state payroll in memory because of a 14- day impasse, other states already had shut down operations or forced thousands of employees to go without paychecks because of budget deadlocks.
– In Maine, non-essential government services were shut down Thursday for the second time this month, and angry state employees marched on the Capitol to demonstrate their disenchantment.
– In Connecticut, too, the mood was ugly after the closing of some state agencies disrupted the July 4th holiday and beaches and state parks were shuttered. A stopgap spending measure returned state employees to work through July 28.
– In Pennsylvania, nearly 20,000 state employees missed two pay days. Their fate is similar to that of more than 10,000 state workers in Illinois who won`t get paid Monday.
– In California, the state has until Monday to erase the remainder of a whopping $14.3 billion budget gap before cash reserves run out and state employees don`t get paid.
”It`s never easy to make difficult choices,” observed Marcia Howard, deputy director of the National Association of State Budget Officers, of the politics that have mired the process. ”When the choices are between raising taxes or cutting programs, understandably they put off making them as long as they possibly can. I think that`s the case in almost every state that doesn`t yet have a budget.”
Other states that missed deadlines for passing budgets are Ohio, North Carolina, Massachusetts and Louisiana. Budget troubles are anticipated in Texas, Alabama and Michigan, which begin their new fiscal years later.
Wisconsin GOP Gov. Tommy Thompson is unhappy with key provisions in the spending plan legislators gave him, and he could wind up vetoing parts of it by August. Florida`s budget is slated for some fine-tuning once the fiscal year is under way.
Forty-nine states are required by law to enact a balanced budget; Vermont is the only exception.
California and the suddenness of its fiscal crisis exemplify a national trend for recession-wracked states that grew accustomed to steady revenue growth in the 1980s and now must make difficult choices about how to retrench in the 1990s.
For the 1992 fiscal year that began July 1, California state government, with an annual budget of $56.4 billion, faces a gap between spending and expected revenue that is the largest shortfall ever faced by any state. Just three years ago, the Golden State had a $1 billion surplus and returned $75 to every taxpayer.
By comparison, Illinois` proposed budget is $25.6 billion and the projected 1992 deficit Edgar and lawmakers have been whittling at is $1.8 billion. Proportionately, Connecticut is in the worst shape of all, faced with a $2.7 billion deficit in its $7.8 billion budget.
The economy runs in cycles, and state budget experts contend that a national recession, the first since the early 1980s, is the major cause of fiscal distress for the states. Tax revenue collections fell short of projections in fiscal 1991 and continue to decline, while recession-related public aid caseloads and other entitlement burdens increased.
For example, Illinois Bureau of the Budget director Joan Walters said the state closed out its 1991 fiscal year on June 30 with a $396 million shortfall that is now part of the budget gap to be eliminated in fiscal 1992. At the same time revenues lagged behind projections, the public aid caseload exceeded budget estimates by 7 percent and required an additional $41.5 million.
”A change that seems rather moderate in the scheme of things can actually cause a $41 million hole in a budget, just like that,” Walters said. And nearly as much had to be paid out in associated medical benefits for the new welfare families, she said.
As anyone who keeps a checkbook knows, even a slight shortfall in revenue throws a spending plan out of whack. Prime examples are Northeastern states such as Massachusetts and Connecticut, where projections of annual revenue growth were exceeded by 50 percent or more during the 1980s, making them flush and prone to spending sprees.
”Now, you`re projecting 3- or 4-percent growth and getting 2 percent, or nothing,” said Relmond Van Daniker, executive director of the National Association of State Auditors, Controllers and Treasurers. ”Two percent out of a couple billion dollars is a lot of money, and you`ve got to make some substantive adjustments.”
The economic growth in the 1980s and the strong revenue showings, said Howard, resulted in expanded state payrolls and new programs.
”That level of growth was not sustainable over the long term, and now state budgets are collapsing under all that expansion,” Howard said. And that fiscal deterioration has a chain reaction impact on schools and municipalities.
Contributing factors in every state`s fiscal slide include burdens shifted from federal and municipal governments; the rocket-trajectory increases in costs for Medicaid (a rate of 20 percent per year), employee health care and expanded correctional systems; and commitments for added spending on education and AIDS.
Texas, for example, has all the same problems of other states as cause for its $4 billion-plus deficit projection, but it must come up with $1.2 billion to pay for a court-ordered plan to even out disparities in financing rich and poor school districts.
To balance their budgets, state legislators and governors must find new revenue (raise taxes) or reduce spending (cut programs and payrolls). Most states are attempting to do both; 35 are trying to raise taxes.
Neither is a habit that makes politicians comfortable.
”Since 1983, we`ve always had a growth budget,” said Illinois state Rep. James Keane (D-Chicago), an assistant majority leader who recalled a halcyon period of a decade ago when he was on a Revenue Committee that handed out $600 million in state tax relief.
Ten years ago Illinois did away with a sales tax on food and drugs that Walters said would net $700 million in annual revenue today.
”Here, and in other states, there`s always been at least enough to fund what we had in previous years, and we fought over who got the new money. Those were good years for politicians,” Keane said in a telephone interview from his Capitol office. ”Now, it`s going to be very painful. People are going to find the services are no longer there. Instead of pats on the back, there`ll be a certain amount of finger-pointing when we go home.”
Edgar and state lawmakers locked up in Springfield can find a little solace by looking at the situation in other states.
The most extreme cases are Maine and Connecticut. In Maine, Republican Gov. John McKernan faces a Democratic legislative majority hostile to GOP proposals for changes in workers` compensation. Independent Gov. Lowell Weicker Jr. cannot knit together a coalition to pass Connecticut`s first income tax and ease pressure on the state`s 8 percent sales tax, the nation`s highest.
McKernan`s situation is similar to Edgar`s and California Gov. Pete Wilson`s, also a GOP governor with a Democratic-controlled legislature. Edgar has insisted on property-tax caps in the budget mix in Illinois, while the worker`s compensation issue has prevented Wilson from closing the last $2 billion of California`s massive deficit projection.
Pennsylvania has been operating without a budget, while Ohio has used a 30-day continuing appropriation.
”There are some very complicated questions facing everyone in state governments, and the deliberative process takes a while to come to grips with the magnitude of a problem,” Walters said. ”In Illinois it took all of the spring legislative session.”
Nationwide, it could take all summer to agree on the solutions.
