Stateline Story

More States Cut Spending to Balance Budgets

  • July 23, 2003
  • By Jason White

In the face of gaping budget deficits, state lawmakers are cutting programs, including higher education and social services, more often than they are raising taxes, according to a report released Wednesday by the National Conference of State Legislatures (NCSL).

The report said 31 states cut programs for fiscal year 2004, which began July 1 in all but four states, while 17 states raised taxes. These actions were taken in response to an aggregate budget gap of $78.4 billion, which is more than 10 percent of state spending, according to NCSL. The report does not spell out where the program cuts occurred.

"[State lawmakers] have balanced their budgets largely without enacting large-scale tax increases. Given the nature of where we are politically it is very difficult to increase taxes," Oklahoma Sen. Angela Monson (D) said at a press briefing at NCSL's annual meeting in San Francisco.

The tax increases states passed this year total $6.9 billion collectively, the report said. Many states also turned to fees to generate more revenue, raising them by $3.7 billion this year.

Monson, who is currently the NCSL president, said large fee increases are a growing trend to make citizens pay directly for services.

"I think it ... reflects a philosophy that it is important that we pay for services as we go," Monson said.

She said this philosophy has taken hold in her home state of Oklahoma, where lawmakers raised the fees to use state parks, with the money going to park maintenance and repair.

State lawmakers' preference for program cuts over revenue increases continues a trend that may be the defining feature of the now two-year-old state budget crisis. This preference is a reversal of what states did to close deficits during the budget crunch of the early 1990s, when they used tax increases to wipeout nearly two-thirds of the dollar value of those gaps.

The impact can be seen in South Carolina, where first-year Gov. Mark Sanford (R) has refused to consider raising taxes.

Instead, Sanford and other lawmakers have cut the money flowing to various programs, such as the South Carolina School for the Deaf and the Blind. Over the last three years, state funding for the school has been cut by 19 percent, to $11.7 million.

The lost funds have forced the school, which serves 800 students throughout the state, to leave 38 jobs unfilled, cut orders for textbooks and leisure reading materials, and curtail sign-reading classes and interpretation services, said Katie Rice, spokeswoman for the school.

"For people who read Braille that's a big disadvantage because they are not going to find it elsewhere," Rice said, referring to the book cuts.

These kinds of cuts have not moved Sanford to consider raising taxes, according to Will Folks, the governor's spokesman.

"His perspective has been what it was during his time in Congress and what it will continue to be as governor of South Carolina, which is that the best way to get out of budget shortfalls is to invest in your economy and not additional government," Folks said.

In the area of higher education, states are reducing spending by 2.3 percent this year, the NCSL report showed. This is leading some schools to drastically raise tuition to make up the difference.

Two of the biggest increases are at the University of Arizona, which increased tuition 39 percent for the 2003-2004 school year, and the University of Oklahoma, which hiked tuition nearly 28 percent, according to the National Association of State Universities and Land-Grant Colleges.

States are entering their third straight year of budget deficits. Their fiscal fortunes first nosedived in 2001, as revenues fell sharply from previously stratospheric heights. The decline started in the manufacturing states of the Midwest and Southeast, but has been most severe in Northeastern and far West states, such as California and Oregon.

So severe is the situation in these two states that they have yet to pass budgets for fiscal year 2004. Both are embroiled in bitter debates over whether to raise taxes. As a result, neither was included in the NCSL survey, which drew responses from 43 states.

In California, Gov. Gray Davis (D) and Democratic legislators are trying to raise the sales tax. Republicans are resolutely opposed to any tax increases. The dispute depressed Davis' approval ratings, leading to a recall movement.

In Oregon, lawmakers are divided over how much taxes should be raised, with Democratic lawmakers pushing for bigger increases than the Republicans.

Despite a plethora of bad news coming out of states, the NCSL report contains some signs that state fiscal fortunes may turn around.

"Good news may be on the horizon," Monson said. "The state fiscal officers we surveyed are predicting that revenues will rebound in the current fiscal year ... We take this as an encouraging sign that we may be sailing through the end of a very difficult storm."