Stateline Story

Statehouses Wind Down, but Budget Issues Remain

Many states' lawmakers have wrapped up their work and gone home, but legislatures in 11 states are struggling on deadline to pass fiscal 2005 budgets to keep their governments running this year, and as many as 12 states may throw up their hands and call special sessions to finish business.

For the 20th year in a row, New York failed to pass a budget for the fiscal year that began April 1 and is limping along with last year's budget levels. Nine states are expected to work down to the wire to hammer out budget accords for new fiscal years that begin July 1: California, Delaware, Illinois, Kentucky, Louisiana, Massachusetts, New Jersey, Pennsylvania and Rhode Island.

Michigan has until Oct. 1, the start of its new fiscal year, to write its budget. But Gov. Jennifer Granholm (D) wants lawmakers to act by June 15 on proposals including higher tobacco and liquor taxes. All but four states begin their fiscal years July 1.

The final days of almost any legislative session are usually the most intense and newsworthy because lawmakers, like almost anybody, often put off the toughest issues until last. As this year's legislative sessions wind down, budget issues are high on the list of the hardest nuts to crack, even though states are in nowhere near as dire straits as last year when nearly one-third of states called or threatened to call special sessions to keep budgets out of the red.

Other issues that are riveting state lawmakers' attention -- and that are dragging some sessions into extra innings -- are impeachment hearings in Connecticut to determine whether Gov. John Rowland (R) stays in office, school finance controversies and medical malpractice.

Overall, states' revenue picture is markedly brighter than last year. States are relieved to see their tax revenues finally growing in the range seen before the 2001 recession, according to statistics released last month by the Nelson A. Rockefeller Institute of Government, of the State University of New York. The jobs front also appears to be improving. Nearly 1 million new jobs have been created since January, according to federal labor statistics.

"Yes, there are some improving [economic] numbers out there ... but caution is still very much the word," said Arturo Perez, a budget expert at the National Conference of State Legislatures, which tracks closely state legislative sessions.

The Council of State Governments' Sujit M. CanagaRetna agrees. "States have just lifted their heads from the crushing blows of the last four years, but there are still several disconcerting factors, like energy, which obviously has an impact on state economies." Higher gasoline prices and a looming hike in interest rates from the U.S. Federal Reserve that would make it more expensive for states to borrow have most statehouses keeping a close eye on their budgets.

The sticking point in budget talks in New York is how to fund education. The Empire State is one of 25 battling lawsuits over the way schools are funded. New York faces a July 30 deadline to provide the court with a plan. "School finance is a huge issue. ... School spending is what is driving a lot of the tax increase decisions at the states," said Chris Atkins, a tax and fiscal expert at the American Legislative Exchange Council, which describes itself as an association for conservative state lawmakers.

Neither Arkansas nor Texas was slated to hold legislative sessions this year, but both already have called lawmakers back for special sessions to figure out how to pay for public schools. Arkansas went back into session June 9 but adjourned without resolving its school-finance shortfall while Texas may go back to the drawing board later this summer.

Lawsuits or threats of lawsuits are flying in Kentucky over its Legislature's failure to pass a two-year budget before adjourning in April. Observers are bracing for a repeat of the failed budget talks of 2002 when then-Gov. Paul Patton (D) imposed his own spending plan when lawmakers failed to act, setting off a flurry of litigation until the Legislature finally passed a budget. Attorney General Greg Stumbo in May asked the courts to clarify whether the governor can legally issue a spending plan without the Legislature's approval. A major reason for the impasse: the House and Senate can't agree whether to include Republican Gov. Ernie Fletcher's tax reform package in the budget bill.

This year's budget talks were not without some comic relief. South Carolina Gov. Mark Sanford (R) drew legislators' notice and ire when he brought two squirming pigs into the state House to complain about "pork" in the state budget.

States that already have passed budgets still may tackle money issues in special sessions:

  • Alaska Gov. Frank Murkowski (R) called lawmakers back to a June 22 special session to focus on the budget, tobacco taxes and workers' compensation. The Legislature rejected the governor's bid to dip into a portion of the state's oil wealth from the state's so-called permanent fund to get itself out of budget trouble. 
  • Colorado The Legislature adjourned May 5, leaving its budget picture clouded in uncertainty because of two conflicting constitutional amendments that limit state spending on one hand and on the other mandate fully funding K-12 education. Gov. Bill Owens (R) is still mulling whether to call a special session to change the state's constitutional limits on raising taxes. 
  • Maine Gov. John Baldacci (D) hasn't ruled out calling a special session in August to discuss bonds and tax reform. 
  • Minnesota Gov. Tim Pawlenty (R) is negotiating with state lawmakers to decide whether to hold a special session on issuing bonds to pay for proposed new transportation projects. Democrats blocked the idea of looking at a constitutional ban on gay marriage.
  • Virginia Lawmakers will reconvene June 16 to consider proposed changes to the budget they approved in late April. Under Virginia law, governors get a chance to alter the spending plan before it becomes law so Virginia Gov. Mark R. Warner (D) has pitched higher spending for transportation, police, tourism, prosecutors and minority programs. The Republican-controlled Assembly went into special sessions several times this spring before approving a historic $1.4 billion tax increase.

But budget issues aren't the only topics threatening to hold state lawmakers captive beyond the normal legislative calendar. Special sessions either just concluded or on tap in several states:

  • Arizona lawmakers are to decide in late June whether to ask voters to protect some 280,000 acres of trust lands from development. 
  • Connecticut lawmakers are set to return June 28 to decide whether to override Gov. Rowland's veto of a medical malpractice measure and to discuss bond issues. A House panel is holding hearings to determine whether to recommend that the Legislature start impeachment proceedings against Gov. Rowland for alleged improper business deals. If the House gives the green light, the Senate must follow suit for impeachment proceedings to begin. 
  • Mississippi this month ended a special session after approving a tort reform package that caps damages in lawsuits at $1 million for pain and suffering.
  • Oklahoma lawmakers are in special session to investigate state Insurance Commissioner Carroll Fisher, who was indicted for embezzling state money. 
  • Oregon's Republican House Speaker convened a special session June 1 to discuss tax reform, but not enough Democrats showed up. Republicans said they were only following through on a measure the Legislature before it adjourned last August calling for a special session. Senate Democrats said the measure hadn't won enough votes to trigger the session. Lawmakers are expected to meet when the next session begins in January 2005. 
  • Wyoming's Legislature will convene July 12 to discuss medical malpractice.