Stateline Story

Six States Miss Budget Deadlines

California, Connecticut, Nevada, New Hampshire, Oregon and Rhode Island all missed budget deadlines as of 12:01 AM Tuesday because of partisan bickering over taxing and spending. In California, state political leaders will start missing paychecks because of it.

A handful of other states, including Missouri, New Jersey and North Carolina, flirted with blown deadlines but reached budget agreements before July 1, the dawn of the new fiscal year in all but four states.

New Jersey lawmakers forged a budget deal after Gov. James McGreevey (D) agreed to reduce his request for $800-$900 million in new taxes by $200 million, The New York Times reported. The agreement slashes state aid for colleges and universities and arts groups while raising cigarette taxes to $2.05 per pack, the highest in the nation.

Had New Jersey lawmakers failed to pass a budget, state government would have been forced to curtail operations.

North Carolina had a budget in place on July 1 for the first time since 1999 as Gov. Mike Easley (D) signed a $14.8 billion package into law Monday, along with a measure that allows him to tap state reserve funds if revenues fall short of estimates. Legislators crafted the reserve funds bill to avoid a budget veto, which Easley had threatened because of what he saw as overly optimistic revenue projections in the budget bill.

Optimistic projections were also an issue in Missouri, where Gov. Bob Holden (D) signed the final part of the state's $19.1 billion budget Monday after threatening a veto earlier in the process. Holden said the budget is still $240 million short and intends to withhold that amount from state agencies, including education, beginning Tuesday, according to The Associated Press.

While the particulars of the fiscal disputes differed from state to state, lawmakers generally don't have enough money to cover the costs of government operations and can't agree whether to cut programs, raise taxes or borrow money, or implement some combination of these budget-balancing measures.

The result: legislative gridlock.

"In any given year, you'll have perhaps a state or two or perhaps more for various reasons that don't have a budget for the new fiscal year. But in times of budgetary crisis like we've seen the states suffer through over the past year or two, the number of states without a budget for the new fiscal year tends to increase," said Arturo Perez, fiscal analyst for the National Conference of State Legislatures.

The consequences of budgetary tardiness vary. Occasionally, state governments will shut down in the absence of a budget agreement, but this is rare, Perez said. California state leaders will go without pay until the situation is resolved, however. And if the crisis drags on, state employees will get smaller paychecks. More commonly, there is little substantive impact -- negotiations will continue unabated, with each day beyond the deadline adding pressure on lawmakers to broker a deal.

On Monday, Connecticut Gov. John Rowland (R) dispatched state troopers to bring legislators back to the Capitol for further budget talks, Associated Press reported.

Rowland and Democratic legislators disagree over how to close a projected $900 million budget gap, with Democrats favoring nearly $700 million in tax increases and Republicans, including Rowland, insisting on more savings through program cuts. Democrats control the state House and Senate.

"I can guarantee you that I'm not going to sign a bill that has $600 to $700 million in tax increases. We're not going to do that. . . .Tell [legislators] to cancel their July vacations. They're in for a long, hot summer," Rowland said last week, The Hartford Courant reported.

Nevada Gov. Kenny Guinn (R) filed a lawsuit Tuesday morning that asks the Nevada Supreme Court to intervene in lawmaker's tax standoff over how to fund the state's education plan, The Las Vegas Review-Journal reported Tuesday. Democrats are pushing for tax increases, while Republicans are fighting to hold the line. Guinn, a Republican, wants the Supreme Court to order a tax increase.

"I have been working closely with Attorney General Brian Sandoval to explore all legal options to compel the Legislature to present a balanced budget and provide the funding for education that the Nevada Constitution guarantees," Guinn said in a statement.

California entered fiscal 2004 without a budget after Democrats, led by Gov. Gray Davis, and Republicans failed to agree on a way to close the state's $38 billion deficit, which is by far the largest deficit among the states. Democrats want to raise the state sales tax to partially close the gap, but Republicans oppose this, saying the budget should be balanced by cutting state agencies.

Without a new budget, California is unable to legally make payments to elementary and secondary schools, community colleges, courts and other agencies. Most of the state's 200,000 workers will continue to receive their full pay, although the salaries of the governor, legislators, state appointees and about 1,000 non-civil service employees won't be paid until a budget is adopted, The Associated Press reported.

In neighboring Oregon, one of five states that currently have no sales tax, legislators are debating levying one. Democrats say a state sales tax is needed to smooth out Oregon's rocky fiscal ride, which rises and falls on an income tax, but Republicans are opposed to any broad tax increases.

Partly as a result of their differences over taxes, Oregon lawmakers also are divided by about $1 billion on a spending plan that will likely end up in the $11 to $12 billion range, the Statesman Journal (Salem) said Tuesday. Gov. Ted Kulongoski (D) signed a bill Tuesday that will allow state agencies to operate for the next month absent a budget agreement.

Unable to agree on a budget for the fiscal year beginning July 1, New Hampshire lawmakers instead brokered a deal that will enable government operations to continue uninterrupted for the next three months. The stopgap measure was needed because the New Hampshire House failed by four votes to override Gov. Craig Benson's (R) veto of its $8.8 billion spending plan, The Union Leader reported.

The Rhode Island Senate is scheduled to consider this week a budget already passed by the House. Gov. Don Carcieri (R) vows to veto the budget if the state Senate doesn't support his requested changes to the pension system, which would require state workers and teachers to contribute a greater percentage of their income to the pension fund.