Legislators Return to Fill Budget Holes

Legislators in six states have returned to their state capitols or plan to do so soon to fill rapidly growing budget holes.

These “special session” have been called because the states are taking in fewer tax dollars than expected, while spending pressures show no sign of abating, and may even be increasing.

At least four other states are considering special sessions as well.

The culprit is a slowing national economy that was likely pushed into recession by the events and aftermath of Sept. 11. As a result, sales taxes and corporate and individual income taxes have been running short of projections, and states are facing increased medical, social welfare and security costs.

Balanced-budget requirements in every state but Vermont require the states to make sure that expenditures don’t get ahead of revenues, even if that means correcting the budget well into the fiscal year.

As a general rule, governors can make across the board cuts to all agencies, but they require the approval of the legislature to restore spending in one area, say education, or cut deeper in another.

“Governors are granted considerable powers to deal with budgets during the interim,” said Arturo Perez, fiscal analyst at the National Conference of State Legislatures. “But at the same time their power is limited. The governor usually can’t transfer money among programs.”

Governors may also reconvene the legislature for political cover if painful cuts need to be made.

On Monday, Iowa Gov. Tom Vilsack announced he was calling legislators back to Des Moines to restore spending to some programs after he slashed all agency budgets by 4.3 percent. The governor would like lawmakers to exempt elementary and secondary education, public safety and defense during the session scheduled to begin Nov. 8.

Florida and Hawaii both opened sessions this past Monday, Oct. 22. A slump in tourism is hitting both states hard.

Florida lawmakers are trying to cut $1.3 billion from the state’s $48 billion budget. The only option not on the table appears to be tax increases.

Hawaii’s Legislature is searching for ways to ease the state through what Gov. Ben Cayetano has called its “greatest economic crisis and our most serious challenge.” Early reports out of the session show legislators deadlocked over whether construction tax credits should target businesses or individuals.

Nebraska lawmakers returned today, Oct. 25, to try to cover a $200 million shortfall in the state’s two-year $5.5 billion budget.

Arizona and Connecticut will both kick-off special sessions on Nov. 13. Connecticut lawmakers are trying to fill a $300 million budget hole, while Arizona lawmakers will be looking to close a deficit that could reach $1.6 billion over the next two years.

Other states considering special sessions include Alabama, California, Oregon and Tennessee.

Alabama’s session is likely. Gov. Don Siegelman has promised to order no further education cuts, but revenue shortfalls are making that promise a difficult one to keep. He will need legislators to save education from additional spending reductions.

By some estimates, California will be looking at a $9.5 billion budget deficit by next summer. Gov. Gray Davis plans to open a fiscal summit on Nov. 2 to discuss this and other matters, but he has not yet decided whether to reconvene the legislature. He has already ordered agency heads to find ways to cut their budgets by 15 percent.

Oregon lawmakers may return in January, but Gov. John Kitzhaber is waiting for December’s revenue estimates before making a final decision.

Tennessee’s fiscal situation may be the messiest of the bunch, but legislative leaders remain far apart on how to clean it up. Unless they reach some sort of consensus, a special session is unlikely, said a spokesperson for Gov. Don Sundquist.