Ballot Items May Bring More Budget Woes
By John Gramlich, Staff Writer
(Updated 1:15 p.m. EDT, Oct. 29, 2008)
State leaders struggling to balance their budgets in the weakening national economy soon may have another problem on their hands: ballot initiatives that, if approved by voters next month, could impose new burdens.
More than 150 initiatives will appear on ballots in 36 states on Nov. 4, and some of the measures could strip state officials of key sources of revenue or put them on the hook for costly new programs. Other proposals would expand borrowing at a time when many states already find themselves billions of dollars in debt.
Nowhere are the stakes higher than in Massachusetts , where voters will decide whether to eliminate the state's 5.3-percent personal income tax, which supplies nearly half the Bay State 's annual budget. But efforts to repeal or reduce taxes also are on the ballot in Maine , Oregon and North Dakota , where voters could cut the personal income tax in half and reduce the corporate income tax by 15 percent, slicing the state's general fund by 17 percent.
In Arizona , voters will weigh in on measures that would ban some state and local property taxes and place strict new requirements on any future ballot initiatives that seek to raise taxes.
Californians will decide on a dozen potentially pricey proposals, including an expansion of drug rehabilitation programs for tens of thousands of criminals, which could cost more than $1 billion a year, according to state estimates. A pair of competing crime-related proposals in Oregon would commit the state to spending millions of dollars on more prison beds, according to the state.
At least seven states - Alaska, Arkansas, California, Colorado, Ohio, Maine and New Mexico - will consider bonding proposals "cumulatively worth tens of billions of dollars," according to an analysis by the National Taxpayers Union , an anti-tax group that opposes the measures. Among the highest-profile initiatives is Proposition 1A in California , which authorizes the state to borrow $10 billion by issuing bonds to help pay for a proposed high-speed bullet train between Los Angeles and San Francisco .
This year's ballot measures could bring fresh headaches for governors and other state leaders as they try to address what experts have characterized as the worst fiscal crisis facing states in a quarter century. Tax revenues are plummeting, unemployment is rising and states from Washington to Virginia are scrambling to cope with gaping budget shortfalls.
Unlike the federal government, states are required to balance their budgets. If costly programs are approved or revenue is cut, states commonly recoup the money by slashing services or laying off employees, dipping into rainy day funds or raising taxes and fees.
Massachusetts Gov. Deval Patrick (D), for example, announced Oct. 15 that he would eliminate 1,000 state jobs in an effort to close a budget gap estimated at more than $1 billion. Even governors in states that have been relatively insulated from the economic downturn - including Colorado , Pennsylvania and Utah - recently have taken steps to cut costs amid declining revenue.
Among the ballot measures being decided next month, "anything involving new programs or spending is going to be an issue," said Scott Pattison, executive director of the National Association of State Budget Officers . Pattison noted that the worst fiscal problems for states are yet to come, as tax collections begin to reflect the recent worsening of the economy.
Despite the worries of many state officials, those pushing tax-repeal proposals on this year's ballots say they see the economic crisis from the taxpayers' point of view - not from the government's perspective.
Carla Howell, chair of the Committee For Small Government in Massachusetts, said the income-tax repeal her group got on the ballot in the Bay State will rein in out-of-control state spending and help taxpayers when they need it most. Ballot Question 1, if passed, would give roughly $12.5 billion of the state's $28.1 billion overall budget - or about 45 percent - back to taxpayers.
If approved, the plan would cut the income tax in half next year and eliminate it the following year.
"The squeezing of people's pockets is all over the news. People are suffering home foreclosures, bankruptcy, losing jobs and are fearful of losing their credit lines," she said in a telephone interview. "Ending the income tax will give back an average of $3,700 per taxpayer every year, money that families need (now) more than ever."
Those opposed to the measure - including Patrick, who has called it "just a dumb idea" - say it would force far-reaching cuts in services that would be felt across the state. Nick Johnson, director of the State Fiscal Project with the Center on Budget and Policy Priorities in Washington , D.C. , said the initiative would have such a disastrous effect on state finances that "it almost defies analysis."
Anti-tax proposals also are causing consternation among state officials elsewhere, even in places seemingly immune to the flagging economy. In North Dakota - which has enjoyed a huge budget surplus, in part because of its booming oil industry and relative isolation from the mortgage crisis - the proposal to cut personal and corporate income taxes would reduce the state's $2.5 billion two-year overall budget by $415 million, according to state estimates.
Herbert Urlacher, the Republican chairman of the Finance and Taxation Committee in the North Dakota Senate, said the provision could come back to haunt lawmakers in the future, noting that "oil revenues won't be here forever."
"It would be more difficult to increase (taxes) when times aren't good," Urlacher said. "Our constitution requires balancing the budget. It might lead to a cut in services in the long term."
Not all state officials are fearful of ballot measures that affect their budgets - especially when they would generate money for the state.
Maryland Gov. Martin O'Malley (D) announced Oct. 16 that his administration had cut nearly $300 million in state funds as it tries to close a $437 million shortfall this fiscal year and prepares for a shortfall of more than $1 billion next year. O'Malley and others in state and local government have vocally supported a ballot initiative that would allow slot-machine gambling in the state as a way to generate new revenue.
The state estimates the initiative could generate more than $600 million a year in revenue, to be used primarily to fund education.
"It'd be fair to say that local governments in Maryland are already feeling the squeeze of economy-driven revenue shortfalls," said Michael Sanderson, legislative director for the Maryland Association of Counties . "There are going to be tough decisions ahead at every level of government. A failure of this constitutional amendment would just exacerbate those challenges."
Editor's Note: An earlier version of this article incorrectly reported that North Dakota's two-year budget is $1.3 billion. The state's projected budget surplus is $1.3 billion; its two-year budget is $2.5 billion, according to state figures.