2010 Speeches Are Bleak for Most Governors

 

With nearly three-quarters of their seats up for election this year, the nation's governors are setting the stage for 2010 by warning that the economic downturn is far from over in the states, where tax collections are weak, unemployment is surging and the likeliest outcomes will be unpopular tax hikes and sharp budget cuts.

An analysis by Stateline.org of the 27 state of the state speeches delivered by governors so far this year leaves no doubt that the recession — which many economists believe ended late last year — has not yet turned the corner into a quick recovery for most states.

Governors are using their annual speeches to brace state lawmakers and voters alike for another year of deep budget cuts, which will be made all the more difficult because the "easy cuts," as they like to say, have already been made.

"We have already cut hundreds of millions of dollars in state spending. While we can make more targeted cuts, it is important to note that most state agencies have been cut to the bone," New Mexico Gov. Bill Richardson (D) warned lawmakers Jan. 19.

But cuts alone are unlikely to solve the problem for many states, which collectively must resolve tens of billions of dollars in shortfalls in the current budget year before lawmakers can move on to next year's spending plans. In California alone — where legislators last year closed a record $60 billion in budget gaps — a new $20 billion shortfall awaits.

Illustrating the depth of states' fiscal troubles, five governors already have proposed tax hikes, including Illinois Gov. Pat Quinn (D), who must face the voters in a Democratic primary in less than two weeks. Five more have looked to the federal government for more money, including California's Arnold Schwarzenegger (R), who has presented a budget plan that relies on $7 billion in as-yet-unapproved federal help. And almost every governor who has delivered a speech has prioritized job creation, wary that an unemployed electorate is an unhappy one.

Thirty-seven governors' seats and 46 state legislatures are up for election in November.

Fiscal crisis isn't over yet

Governors of both political parties have warned that the national recession will continue to batter their states, particularly as tax revenues lag and demand for state services, such as health care, increases.

A common challenge for states this year is the dwindling of federal stimulus dollars, including $87 billion for Medicaid — the joint state-federal program providing health care to the poor — that will run out in December. Governors in some states are predicting that the toughest times may, in fact, lie ahead.

"I urge you to be prudent and conservative…to err on the side of less spending, lest you make next year even worse," Mississippi Gov. Haley Barbour (R) told lawmakers Jan. 18, citing "these enormous amounts of disappearing federal funds."

Almost every governor's speech to date also has contained references to the need for a smaller and more efficient state government. Washington Gov. Chris Gregoire (D), for example, said she would seek to eliminate 78 boards and commissions and close 10 state institutions, including five prison facilities. Iowa Gov. Chet Culver (D) called on lawmakers to approve efficiencies he said would save taxpayers $200 million a year.

Tough times prompt talk of tax changes

Governors in Arizona, Illinois, Kansas and Washington have proposed tax hikes, while Richardson said he would allow one from lawmakers in New Mexico. The proposals are particularly eye-opening in Arizona and Illinois, where fiscal problems have been far more dire than in most states and where incumbents are up for election this year and already have primary challengers. Quinn faces Illinois Comptroller Dan Hynes in the Democratic gubernatorial primary Feb. 2.

In Washington, Gregoire's call for $750 million in new revenue breaks a 2008 campaign pledge she made not to raise taxes.

"Like you, I do not want taxes to harm the economic recovery of our families or our businesses," Gregoire told lawmakers. "But I also cannot abandon my values, eliminate the safety net for our most needy and cripple our economic future."

Governors in Alabama, Alaska, California, Virginia and Washington have proposed new tax credits to spur hiring, while other governors, including those in Iowa and New York, promised to review existing tax credits to ensure they are worthwhile. In Vermont, Gov. Jim Douglas (R) is seeking broader tax cuts as a way to attract businesses and create jobs.

Schwarzenegger, meanwhile, embraced the recommendations of a tax reform commission that proposed a fundamental overhaul of the Golden State's revenue structure, including eliminating the statewide sales tax and decreasing personal income taxes for everyone. The lost revenue would be made up primarily by a new business tax.

Republicans send warnings on health care

Republican governors in Alaska, Arizona, California, Idaho and South Carolina in their speeches sharply criticized Congress' efforts to change the nation's health care system, claiming the plans being hashed out on Capitol Hill would impose huge new fiscal burdens on the states.

A special deal secured by U.S. Sen. Ben Nelson (D) of Nebraska — in which his home state would be permanently exempted from paying the costs of expanding Medicaid — drew particular scorn from Schwarzenegger and Arizona Gov. Jan Brewer (R).

"That senator got for the Cornhusker State the corn and we got the husk," Schwarzenegger said. Brewer lashed out at a "federal government whose unfunded mandates and sweetheart deals steal Arizona's freedom and threaten to bankrupt our state."

More federal money for states?

The governors of California, Kansas, Missouri, South Dakota and Washington all mentioned the possibility of additional federal dollars to help balance their budgets, though Congress has publicly shied away from using the words "second stimulus" when describing any extra help for the states that might be in the offing.

"We are now hearing from Washington, once again, that a possible amendment to the health care bill might include a 'Stimulus 2' for states," South Dakota Gov. Mike Rounds (R) said in his speech Jan. 12, noting that the money — if approved — would probably take the form of extra Medicaid dollars.

No governor has been more aggressive for more federal help than Schwarzenegger, who, two days after his state of the state speech, unveiled a budget proposal that relies on $7 billion in additional revenue from the federal government. Schwarzenegger and legislative leaders were in Washington, D.C., this week to make their request in person, though they received a chilly reception from some members of Congress.

"Budget deficits that are made in California need to stay in California, and that goes for the other 49 states as well," Republican U.S. Rep. Tom McClintock said about his state's request, according to The Sacramento Bee .

State budget crisis? It's all relative

For governors in some states, a tried-and-true rhetorical strategy allowed them to sound like optimists in their speeches. While acknowledging their states' own bleak finances, they made a point of noting that other states are faring even more poorly.

"Across America, forty-nine other addresses are being given, almost all under conditions far more grim than those we confront," Indiana Gov. Mitch Daniels (R) said Jan. 20, singling out a handful of other states that, he said, are in much worse shape than the Hoosier State.

"Compared to its budget, Illinois' fiscal problem is four times larger than ours," Daniels said. "Arizona's, five times. California's, six times. Out there, the governor recently exclaimed in desperation, 'How could we let something like that happen?' So far at least, no one in this room has to ask that question." Daniels did have to come up with $767 million in budget cuts to help fill a $1.5 billion shortfall in his fiscal 2009 state budget.

"Many states have raised income or sales taxes — Nebraska has not. Many states spent beyond their means — Nebraska did not," Gov. Dave Heineman (R) said.

In West Virginia, "Our welcome centers and rest stops have stayed open, our state offices have normal operating hours, our social services continue and we are paying our bills on time," Gov. Joe Manchin III (D) said, drawing subtle distinctions from Virginia, Utah and California, respectively.   

 
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