US & World

Governors bemoan steep slide in state revenues

Listen to story

Download this story 2.0MB

At the annual meeting of the National Governors Association, one hot topic was how badly states have been hit by the economic downturn; they've seen the steepest decline in tax revenues on record this year.

States would be in even deeper financial trouble if it were not for federal stimulus funds that have helped pay for education, Medicare and new infrastructure, several governors say.

"I don't know what we would have done without it," says Gov. Chris Gregoire of Washington, who was among fewer than half the nation's governors who managed to break away from their own state's fiscal crises to attend the National Governors Association meeting in Biloxi, Miss.

"In terms of being able to come to a budget with a deficit that we were facing, ask the voters for no new revenue and get home on time, the federal stimulus dollars were key to that," said Gregoire, a Democrat.

While many governors expressed concern about what happens when the money runs out, few if any are calling on Congress and the White House to provide another stimulus package.

The recession has hammered the states, causing a 24 percent drop in their revenues nationwide, the NGA says. A large chunk of the shortfall comes from the biggest drop in tax revenue on record.

As a result, even with the federal stimulus, the states are facing a wholesale fiscal crisis.

"We're projecting shortfalls collectively ... in the next several years of more than $200 billion," says West Virginia Gov. Joe Manchin, a Democrat, who said that figure is "even with the assistance that we receive."

The urgency of the problem was underscored by the absence of even the NGA's chairman, Pennsylvania Gov. Edward Rendell, a Democrat, who appeared at the summit via video link because he was preoccupied with the Keystone State's budget woes.

Meanwhile, the organization's incoming chairman, Vermont Gov. Jim Douglas, a Republican, says that while the cash infusion from Congress has helped, states face a difficult task in figuring out how to close their yawning budget gaps after the stimulus cash runs out in 2011.

"In Vermont, a quarter of our population is on Medicaid, so (the federal stimulus) was particularly welcome to shore it up over the next couple of years," Douglas said. "But we have to restructure our state governments (and) ... economies so we are ready to get along without these federal resources in a couple of years."

Even so, there seems to be little enthusiasm from state leaders of either political party for a second emergency infusion from the federal government — a view summed up by the Republican governor of Mississippi, the state hosting the conference.

"Put me down for 'no,' " Gov. Haley Barbour said when asked his opinion about more stimulus dollars.

"We're up on a very high peak that we're going to have to get down from when this stimulus money runs out," he said. "But pushing that off another year or two years is not the answer, because the American people don't have the money to give us."

New Mexico Gov. Bill Richardson said he thinks the stimulus is working and says at best it's too early to consider a sequel.

"Before we start thinking of another stimulus, let the states work out the two years that are needed for the first stimulus package," said Richardson, a Democrat. "I'm worried about the deficit, and I think we've got to be careful about another stimulus package right now."

The governors hope that by then, the economy will have turned around and that in the interim, Congress doesn't saddle them with an expansion of Medicaid as part of the health care bill currently under consideration.

"What we don't want from the federal government is unfunded mandates," Douglas said. "We can't have the Congress impose requirements that we are forced to absorb without the capacity to do so."