States Are Hit Hard by Economic Downturn

Gov. Arnold Schwarzenegger has proposed a $4.8 billion cut in education services as California faces a $16 billion shortfall.
Gov. Arnold Schwarzenegger has proposed a $4.8 billion cut in education services as California faces a $16 billion shortfall. (By Rich Pedroncelli -- Associated Press)
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By Keith B. Richburg and Ashley Surdin
Washington Post Staff Writers
Monday, March 31, 2008

NEW YORK -- In Illinois' Cook County, women in poor neighborhoods no longer have access to free mammograms from two mobile vans testing for breast cancer.

In Michigan, hikers will find about 20 campgrounds closed, and scientists are ending their studies of fish populations in the Great Lakes.

In New Jersey, state workers are being laid off, and at least one town is canceling its traditional Fourth of July fireworks.

And in California's San Fernando Valley, Everardo Orozco, 53, who has AIDS, exhausted his medical benefits and can no longer afford the drugs that are keeping him alive.

"I don't know which ones I can afford every month," Orozco said, explaining how his supply is dwindling and his share of the payments has skyrocketed from $400 to $3,200 per month. He now injects himself with some medications once a day instead of twice -- not enough to keep his T-cell count from dropping or to prevent his body from becoming resistant to treatment. And he fears that there will be more cuts.

State budgets have been hit hard by a worsening national economy, including rising costs for energy and health care. In addition, fallout from the subprime mortgage crisis -- declining home sales, deflated property values and mounting foreclosures -- has caused a slide in states' anticipated tax receipts. Revenue from property taxes, sales taxes and real estate transfer taxes is affected.

At least half of the nation's states are facing budget shortfalls, some of them severe, and policymakers in most of the states affected are proposing and passing often-painful measures to trim costs and close the gaps. Spending on schools is being slashed, after-school programs are being curtailed and teachers are being notified of potential layoffs. Health-care assistance is being cut for the elderly, the disabled and the poor. Some government offices, such as motor vehicle department locations, will start closing on weekends, and some state workers are receiving pink slips.

Some analysts worry that the impact is being felt disproportionately by the most needy.

"It's disappointing, the extent they tend to focus their cuts on the most vulnerable," said Iris J. Lav, deputy director of the Washington-based Center on Budget and Policy Priorities, a liberal think tank that monitors state budget issues. "It does appear to disproportionately affect low-income people."

Unlike the federal government, which can run deficits, almost all states are required by their own laws and constitutions to balance their budgets. Many states are just now hammering out their budgets, so some targeted programs could still be saved in last-minute negotiations.

In most states, talk of raising taxes has become politically perilous, particularly with residents already hurting from falling housing values and a worsening economy.

Only half a dozen states have approved, or are considering, tax increases, including Maryland and Michigan, both of which raised taxes in 2007. In New Jersey, which has a $3 billion deficit, Gov. Jon S. Corzine (D) has proposed eliminating or reducing most property tax rebates. In New York, facing a $5 billion shortfall, an idea in the General Assembly for a new income tax for people making more than $1 million per year died last week after the Republican-controlled Senate, and Gov. David A. Paterson (D), strongly opposed it.

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