The $200 billion in deficits that states face over the next two years will put the brakes on most big-ticket items in governors' 2009 wish lists as the new legislative year gets under way amid the bleakest economy in a generation.
Republican Gov. John Hoeven of North Dakota warned that even his state that has in the past seemed recession-proof could find this year tougher.
"The state of our state is strong," Hoeven said, as he kicked off this year's round of governors' "state of the state" addresses that lay out the top executives' visions for the coming year. But he noted that as many as 41 other states face budget deficits this year and next.
"Clearly our nation's economy is in a down cycle, and we in North Dakota are not immune from its effects," Hoeven said.
Hoeven leads one of only a handful of energy and farm states that up until recently escaped the worst of the recession.
But the slumping economy is hitting even prosperous states like North Dakota, Iowa, Indiana, Nebraska and Texas.
Without a doubt, closing deficits will be the top issue for the 2009 legislative session. Unlike the federal government, states are required to have balanced budgets. North Dakota is among more than a dozen states that begin their legislative sessions this week. Colorado, Connecticut, Indiana, Kentucky, Missouri, New Hampshire and Pennsylvania are among others.
Experts say that state lawmakers will have to be innovative to sell their budget plans to voters, especially if they involve slashing popular social programs or raising taxes. In New York, for example, the state's top health official appears in a YouTube video promoting Gov. David Paterson's (D) proposed 18 percent "fat tax" on soda and other sugary soft drinks.
Paterson isn't the only governor talking about raising taxes to balance their budgets, a move that for years was considered too risky for fear of voter backlash.
Paterson and California Gov. Arnold Schwarzenegger (R) both have proposed extending their state sales taxes to certain services, ranging from furniture repair to veterinarian services in California to haircuts and movie tickets in New York. The governors of Idaho, Oregon and South Dakota have all called for a higher gas tax.
Paterson gives his state of the state address today (Jan. 7) as does Connecticut Gov. M. Jodi Rell (R). Both states rely heavily on the financial sector and have been rocked by the fiscal meltdown on Wall Street.
Stateline.org will track closely all 50 governors' speeches. Click here for Stateline.org's issue page that includes daily stories from local and national media about this year's governors' speeches and links to the full text of 2009 addresses.
Click here to access Stateline.org's archive of the full text of governors' "state of the state" addresses since 2000.
In a first for the Rhode Island governor, Don Carcieri (R) will go on local television tonight (Jan. 7) to deliver his budget address, unveiling "the hard choices" he says are necessary cuts as the state faces "unprecedented budget challenges." Carcieri will deliver his state of the state address later in the year at a date yet determined.
In California, where Schwarzenegger has warned the state faced "financial Armageddon," the governor has delayed until Jan. 15 his state of the state address, as insiders speculate that he wants to have a budget deal with the Legislature before speaking to voters. The state faces a $40 billion deficit over the next 18 months.
In Florida, which has seen a 49 percent surge in food stamp requests and is facing a $2.3 billion deficit, Republican Gov. Charlie Crist is banking on finalizing a gambling agreement with the Seminole Indian Tribe and drawing on tobacco trust money. Crist will give his speech March 3. Many states and governors are lobbying Congress and President-elect Barack Obama for billions of dollars in federal aid to help states cover rising enrollment in Medicaid, unemployment benefits and the food stamp program. Democratic governors from New York, New Jersey, Massachusetts, Ohio and Wisconsin recently suggested a $1 trillion economic stimulus package, including $350 billion for infrastructure, $250 billion for anti-poverty programs and $250 billion for education. Health-care and education programs, which make up more than 60 percent of state spending, are already on the chopping block in many states. Utah, for example, ended some physical therapy, vision and hearing services offered under Medicaid, the national health insurance program that serves 59 million needy, while Nevada has capped enrollment in its state children's health insurance program (SCHIP).
On the education front, Washington state is considering slashing $1 billion in school funding to help plug a projected $5 billion shortfall over the next two years while Ohio may have to lift a tuition freeze to help patch a $7.3 billion shortfall for the upcoming two-year budget. State employees also will feel the pain. Maryland Gov. Martin O'Malley (D) last month ordered temporary furloughs for two days for most of Maryland's 80,000 state employees to save an estimated $34 million over the next fiscal year. Kentucky Gov. Steve Beshear (D) wants some state employees to take up to 24 days of unpaid leave in the next two years, The Courier-Journal (Louisville) recently reported .
Utah Gov. Jon Huntsman Jr. (R) last year ordered a four-day workweek for 17,000 of the state's 23,000 employees. Florida, Indiana, Kentucky, New York, South Carolina and Washington also switched some employees to shorter workweeks as a cost-saving measure. And at least 19 states declared hiring freezes and 14 banned travel to cut costs for fiscal 2009, according to the National Conference of State Legislatures. Governors' ambitious 2008 proposals quickly went nowhere as the housing market tanked and the economy deteriorated. The faltering economy also sank proposals to expand health care insurance from the governors of Illinois, Missouri, New Mexico and Pennsylvania.
See Related Stories:
Budget gap could widen to $200 billion (12/15/2008)
Slumping economy hits prosperous states (12/11/2008)
Shifting economy keeps states guessing (12/4/2008)
Governors hopeful after Obama meeting (12/3/2008)
States ask feds for health care help (11/26/2008)
States eye their share of federal bailout (11/25/2008)
Tough economy hammers schools, colleges (11/17/2008)
States craft plans to stimulate economy (11/14/2008)
Three Western governors float tax hikes (11/13/2008
Depressed economy wallops states (10/24/2008)
State jobless funds are running dry (10/3/2008)
State workers face bleak budget picture (10/3/2008)
States act to cushion Wall Street meltdown (9/30/2008)