Stateline Story

New Governors: Deficits Are 'Opportunities'

BOCA RATON, Fla.-- November 21 -- When Kentucky, Mississippi and Louisiana elected new governors this month, each inherited the sort of budget deficits that can portend tough times, service cuts and plummeting popularity.

They all claim they welcome the challenge.

"I see it really as an opportunity, where we can bring the political will to provide real change," said Ernie Fletcher, governor-elect of Kentucky and one of more than 20 Republican governors gathered in Florida for the Nov. 21-22 Republican Governors Association meeting.

Fletcher, the first Republican in 32 years to be elected governor of Kentucky, said in an interview that he saw this as a chance to make his state's government more efficient. "We tax more than surrounding states, which means we get less value for every tax dollar," he said. "So I do believe there's a substantial amount of room there for increased efficiency."

Fletcher will be sworn into office Dec. 9. Outgoing Democratic Gov. Paul Patton announced recently that the state is facing deficits of more than $700 million in each of the next two fiscal years. Patton recommended that lawmakers consider tax increases to close these gaps and protect services. Fletcher is going to try another way.

"We're going to balance the budget without raising taxes," he told Stateline.org.

Even with the economy and overall state budget situation improving, many states face sizable budget deficits into the foreseeable future, according to David Malpass, chief global economist at Bear Stearns, a major Wall Street investment bank.

"State budget problems are likely to persist. State revenues fall in every recession. They fell more than usual in the 2001 recession because the previous expansion was long and enjoyed unusually strong capital gains. So the revenues in state budgets were puffed-up in the same way the stock market was," Malpass said in comments at the Republican governors' Boca Raton meeting.

Also at the RGA meeting was Mississippi governor-elect Haley Barbour, who said he was going to be "very aggressive" in controlling spending.

"Medicaid (the state-federal health care program for low-income individuals) is clearly an area where we can and must get control of spending," Barbour said in an interview. "We're also going to look at corrections, human services. We're going to be very aggressive."

Mississippi revenues are expected to grow roughly 2.5 percent next year, meaning another year of tight budgets. Barbour's proposed budget is due Jan. 31 and it's unlikely to include any tax increases.

"I'm against raising any state taxes. We've got to control spending and raising taxes is the enemy of controlling spending," he said.

The lone victor in November's gubernatorial races who refused to swear-off tax increases was Louisiana's Kathleen Blanco, who was also was the only victorious Democrat. But like Barbour and Fletcher, Blanco is going to look first at making government more efficient and only later at new revenue sources, a spokesman said. Louisiana is facing a deficit estimated at $600 million.

"You have to pay closer attention to how you are spending your money," said Ed Pratt, Blanco's press secretary. "And that's how you can improve government. Because now you have to scale back some of the things that you have been doing and realign how you are doing other things and basically rework government."

One area of concern to all governors is the rapidly rising cost of health care. Blanco, who was elected Nov. 15 and will be sworn-in Jan. 12, already has created a commission to study the issue.