NewsMine — economy — united-states — 2003 — 2003-may-june — Viewing Item

States horrid budget struggle { June 26 2003 } Original Source Link: (May no longer be active)    http://www.sfgate.com/cgi-bin/article.cgi?f=/news/archive/2003/06/26/national1424EDT0680.DTL http://www.sfgate.com/cgi-bin/article.cgi?f=/news/archive/2003/06/26/national1424EDT0680.DTL Record cuts, higher taxes as states struggle to survive tough times ROBERT TANNER, AP National Writer Thursday, June 26, 2003 ©2003 Associated Press (06-26) 22:37 PDT (AP) -- To survive this fiscal year, states overall cut more from their budgets than they have in about a quarter-century. To get through next year, a record number of governors want to shrink their budgets. A new report Thursday on state governments' fiscal health found widespread pain and scant signs of improvement. Broad program cuts already are in place, governors have proposed $17.5 billion in new taxes and fees, and dangerously low savings are on hand if next year turns out grim, too. "The news is pretty bad, and I think it's going to get a little worse," said Ray Scheppach, executive director of the National Governors Association, which released the new study with the National Association of State Budget Officers. Their report relies on data collected this spring, as governors and legislators began budget talks for the new fiscal year that begins for all but four states in July. The report found: * States cut $14.5 billion to cover shortfalls for the fiscal year that ends next week, the largest correction in the 27 years that governors and budget officers have tracked state finances. * State spending overall grew by 0.3 percent in the current fiscal year, and, based on governors' proposals, was estimated to fall by 0.1 percent next year. * A record high number of 19 states began next year's budget deliberations proposing to shrink spending. Scheppach and Scott Pattison, head of the budget officers' group, said the problems were caused by a sharp and sustained drop in state revenues, combined with high costs for Medicaid, the joint federal-state health care program for the poor. With 28 states ordering across-the-board cuts to government services this year, and tax revenue still too weak to really help, "we're in the situation now where Medicaid is competing with education," Scheppach said. A separate report on Thursday found that state revenues continued to lag. Tax revenues, adjusted for inflation, declined 3.7 percent in the three months from January to March this year compared to last, marking the seventh straight quarter of decline, according to the Rockefeller Institute of Government in Albany, N.Y. Besides cutting programs, 29 governors turned to new taxes and fees to find a way past the fiscal challenges. Governors proposed at least $17.5 billion in higher taxes or fees next year, the biggest proposed increase since 1979. The report doesn't detail how much in new taxes and fees actually won approval or remains under consideration, as many states have finished their budget deliberations and legislative work. An Associated Press analysis of all 50 states found that, as of the second week of June, states had already approved $4.3 billion in taxes and $2.3 billion in fees, and another $16.4 billion in new or higher taxes and fees were still being considered. The new report also warned that the use of reserves, or so-called "rainy day" funds, had left the states significantly less able to cushion any additional economic blows. Reserve balances overall are currently at $6.4 billion, or 1.3 percent of expenditures. In 2000, at the peak of the economic boom, reserves were at $48.8 billion, or 10.4 percent of expenditures. Scheppach and Pattison dismissed criticisms that state leaders failed to respond to the downturn or spent their states into their current problems, noting that states approved significant tax cuts and built up healthy savings when the economy was booming in the 1990s. They said spending then did not grow faster than average. The report studied states' general fund spending, the main discretionary funds that aren't earmarked for specific items. General funds accounted for 47.7 percent of all $1.1 trillion of state spending in 2002, according to NASBO. -------------------------------------------------------------------------------- On the Net: National Governors Association: www.nga.org National Association of State Budget Officers: www.nasbo.org ©2003 Associated Press

318b congress tax cut { May 22 2003 } California borrow record 11b { May 2 2003 } California near financial disaster { June 30 2003 } Consumer spending dips { May 15 2003 } Deflation like great depression { June 20 2003 } Delfation fears grow { May 16 2003 } Delfation fears Dollar falls lower to euro { May 2 2003 } Dollar stable but sick { May 12 2003 } Dow surges 9000 Ehrlich withholds maryland funding { June 26 2003 } Fed cuts to halt deflation { June 24 2003 } Fed rate cut one percent { June 25 2003 } Fed rate unchanged { May 6 2003 } Fed ready 45 year low rate cut Fed refuses to print money Greenspan hits back at buffett warnings Insiders stock selloff { June 8 2003 } Job market worst since 1990 { June 17 2003 } New hyper bull market by small investors { June 22 2003 } Prices decline deflation fears Rate cut steepen dollar slide { May 21 2003 } Sars might ease deflation { May 9 2003 } States horrid budget struggle { June 26 2003 } Stock losses 100 000 fewer millionaires { June 11 2003 } Stocks drop terror madcow fears { May 20 2003 } Stocks fall dow below 9000 { June 10 2003 } Stocks rise cisco sun { May 12 2003 } Tech jobs moving over seas { May 19 2003 } Us cut 6000 airport screeners Files Listed: 30

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