How other states approached budget crises
SPRINGFIELD - When Gov. Pat Quinn and Illinois legislative leaders meet behind closed doors again this week to try to fashion a state budget compromise, they won't be alone.
State lawmakers across the country are in the same boat: struggling to find a way to keep existing services and assist people hurt by the recession, even as that recession eats into the tax revenues states need to pay for those services.
California is ground zero in the state budget battles. The Golden State has until July 1 to come up with a way to fill an estimated $24 billion budget deficit.
Health care, education and labor organizations in California say part of the fix should be boosting the state income tax from 9.3 to 10 percent on taxpayers making more than $250,000 and to 11 percent for incomes over $500,000, along with tax hikes on corporate income, alcohol and tobacco, higher vehicle fees, expanding the state sales tax to services, and repealing earlier tax breaks that help small businesses.
But passing a tax hike in California's assembly requires two-thirds of both chambers to approve and not nearly enough lawmakers are on board.
California Gov. Arnold Schwarzenegger has proposed $16 billion in cuts and borrowing $7.4 billion from local governments and future revenue to balance the budget. Those cuts would knock 900,000 kids off the state's children's health insurance program, eliminate Cal-Works, the state's welfare program that provides assistance to needy families, cut $680 million from education, close up to 200 state parks, eliminate or consolidate state prisons, cut other state agencies and require additional furlough days for state employees, who already have to take two days a month off without pay.
Schwarzenegger even suggested eliminating school textbooks in favor of a digital equivalent, possibly saving the state up to $300 million a year.
Closer to home, the numbers are smaller but the cuts may be just as painful.
Wisconsin's budget will cut state employee pay 2 percent and lay off up to 1,400 workers, even after raising taxes on capital gains, cigarettes, and telephones to close an estimated $6.6 billion deficit. Those tax hikes come on top of $1.2 billion in additional taxes and fees Wisconsin approved in February to fill a deficit caused by lower tax revenue for the budget year ending June 30.
Minnesota lawmakers approved a two-year budget at the end of May that will already be $2.7 billion short when the budget year begins July 1. Gov. Tim Pawlenty vetoed tax increases that would have balanced the budget and now must cancel or delay state payments, a power called "unallotment," in order to keep the state's budget balanced.
That will likely mean major cuts in state aid to local governments, forcing cities and towns to raise local property taxes if they want to maintain their services.
Lawmakers in Indiana will soon meet in special session to put the finishing touches on their state budget. By tapping the state's "rainy day fund" in the face of an eight percent decline in revenue Gov. Mitch Daniels avoided budget cuts to education and public safety. But state universities will get a 4 percent cut and other state agencies will see targeted cuts between two and 14 percent.
"If we lose our sense of discipline now, in no time we'll look just like Michigan or Illinois or, heaven forbid, California," Daniels said.