The Democrats now enjoy a more than 850-seat edge around the country in state legislative bodies. But their reward will be severe budget shortfalls with some states facing shortfalls running into the billions of dollars. The cash crunch will rival the one states had to deal with earlier this decade. In fact, from all projections this year’s problems will likely surpass it. Nick Johnson, director of the State Fiscal Project at the Center on Budget and Policy Priorities, made this observation: “People said that the last fiscal crisis was the worst in 50 years. Now, here we are again.”
It certainly appears that money — or the lack of it — will govern almost every issue that state legislators take up this year. The economic recession will shape many policy and regulatory debates and dictate results. Legislators will have some very difficult decisions to make and nothing will come easy. Every state is facing a critically short money supply and sacrifices will be required.
The biggest uncertainty for the states this year is Washington and how the Obama Administration and Congress will deal with the states on funding issues. If Congress includes significant aid to the states in the economic stimulus package proposed by President Obama, it would change budget calculations in state capitals overnight. Regardless of which state we might mention, including my State of Alabama, the lack of money to fund essential programs will be the overriding problem. Josh Goodman of Governing believes the following issues will have to be dealt with by all state legislative bodies:
• Balancing the Budget: As states get to writing their budgets for the year, many of them also will have to go back and plug holes in last year’s budget. Some 41 states either have a mid-year shortfall for the 2009 fiscal year or will face a shortfall in 2010, according to the Center on Budget and Policy Priorities. Many states already were enduring fiscal problems last year. But others had managed to avoid that fate: states whose economies rely on agriculture or energy resources generally thrived. This year, however, the pain is much more widely shared. According to the Rockefeller Institute of Government, all three legs of the state-revenue stool — personal income taxes, sales taxes and corporate income taxes — are weak. Unless they can scrounge more money out of reserves, legislators will face many difficult choices between cutting spending and raising taxes.
• Education Budgets: Higher education is usually the first line-item states cut when they hit budget trouble. K-12 education is always the top priority as it should be. Colleges and universities can raise tuition rates when state support declines. K-12 programs don’t have that luxury. This year, however, education budgets at all levels will suffer greatly.
• Transportation: The federal government almost certainly will spend billions of dollars on state highway and bridge projects this year. States face long-term problems when it comes to financing transportation projects and more federal aid is essential.
States from coast to coast are rethinking the way they pay for transportation projects. Some of the ideas on the table include tolling new and existing roads, leasing toll roads to private companies and shifting road maintenance to local governments. Meanwhile, some states are studying replacing the gas tax with mileage-based taxes. Whether the political dynamics have changed enough for states to raise gas taxes is uncertain. When gas prices were north of $4 per gallon, such a move would have been politically suicidal. Now, with gas prices much lower, the idea is likely to receive a look in a few states.
• Global Warming: For the past eight years, a growing group of states has pushed for bolder action against global warming. More often than not, the federal government pushed back. Now, with a more sympathetic Administration in Washington, the states will be left with a new challenge: finding their role on climate change as the feds begin to act. States have set targets for reducing greenhouse-gas emissions, formed interstate partnerships to cap emissions from power plants, and have pledged, pending federal permission, to regulate automobile emissions.
• Social Safety Net: The strength of the social safety net that states provide for the poor is about to get its biggest test in at least a generation. Already, it’s clear that there are a couple of holes that need patching. One of them is unemployment benefits. In as many as 19 states, the funds that pay for unemployment benefits have been pushed to the brink of insolvency. Some states likely will ask the federal government for emergency loans, but they also may be forced to raise taxes or make benefits less generous.
At the same time, a lot of states are looking at overhauling their welfare programs. In 2006, Congress tightened some requirements under Temporary Assistance for Needy Families. Now, the implications of those rules are becoming clear. About half of the states probably won’t meet federal standards for shifting welfare recipients into work. One trend is for states to provide financial help to the newly employed, to ease the transition from welfare to work. The reality in 2009, however, is that work won’t be easy to find. Some economists expect the national unemployment rate to reach 9%. As always, demand for social-safety net services will increase at precisely the moment that states struggle most to pay for them.
• Corrections: Budget crises have a way of making the politically impossible suddenly possible. Case in point: criminal sentencing. Corrections was becoming a strain on state budgets even before the economy went in the trash. Over the past few decades, prison populations have grown at a far faster rate than the population as a whole.
Gradually, some states have been stressing alternatives to incarceration, in the belief that rehabilitation programs would prove more effective. But the tenor lately is different: now, it’s about cutting costs, and quickly. Lawmakers in Pennsylvania and Kentucky expanded early release programs last year. Even in conservative South Carolina, the corrections chief is asking legislators to approve early releases.
• Energy: Even as gas prices went down sharply, interest in state energy policy remained as high as ever. Policy makers see alternative fuels and clean energy not only as a means to heal the environment but also to heal their economies. A lot of the discussion in legislatures will be about more traditional energy sources. While the federal government must take the lead in this critical area, the states must play major roles.
• Controlling Health Costs: Health care costs have been growing faster than the rate of inflation for years. Today, Medicaid represents more than 20% of state budgets — and it’s still growing. So as the debate over expanding health coverage moves to Washington, the big health care issue in state capitals will be finding ways to spend less.
• Redistricting: State legislatures won’t begin redrawing electoral maps until 2011 — after the next census and another round of legislative elections. But now is when the posturing begins. A number of states this year will be debating ways to take partisanship out of the process and make elections more competitive.
• Gun Control: The U.S. Supreme Court’s landmark decision on gun control last June established a private right to own firearms. Whether District of Columbia v. Heller will be a boon for the National Rifle Association isn’t clear yet because few places have gun laws as restrictive as the one that the court struck down in that case. But the Heller case did leave some room for persons and groups who want to have reasonable controls over guns and to present their case before state legislatures. There can be gun control without taking away the constitutional right of citizens to own guns.
I’m sure that there are many more issues to be dealt with but the above list will keep the lawmakers in all states very busy and will be a “heavy load!” Some states will deal with their problems better than others. It will be a real test for the politicians.
Source: Josh Goodman, Governing
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