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Survey finds deep distrust of state governments, revealing fiscal conundrum

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Sept. 15 (Bloomberg) -- U.S. state pensions such as Illinois, Kansas and New Jersey are in a "death spiral," with assets at many insufficient to cover benefits, payouts consuming a growing portion of resources and costs rising twice as fast as investment gains. Bloomberg's Monica Bertran reports. (Source: Bloomberg)

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By Michael A. Fletcher
Washington Post Staff Writer
Wednesday, October 6, 2010; 12:05 AM

Residents of five of the nation's most fiscally distressed states harbor a deep distrust of state government, which they view as too big, too wasteful and too quick to pass their costs along to future generations, according to a new survey.

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But the survey, released Wednesday by the Pew Center on the States and the Public Policy Institute of California, reveals a conundrum: While residents reject the idea of new taxes and eagerly embrace budget cuts to solve state fiscal problems, they worry that the reductions would harm vital services.

"There is a disconnect between what the public wants and what is needed to resolve the states' fiscal crisis," said Susan Urahn, the Pew Center on the States' managing director. "Policymakers will have to make unpopular budget decisions to help their states fully recover."

The survey included residents of California, New York, Florida, Illinois and Arizona. Together, those states account for a third of the nation's population, a third of the nation's economic output and about 45 percent of the $89 billion in state budget deficits projected for the current fiscal year.

The report projects that at least half of the nation's governors and an unusually large share of the nation's 7,500 state legislators will be new in 2011. They will face a challenging fiscal climate and a complex public mood, the survey found.

The vast majority of states trimmed their budgets after the recession began in 2007, the report said, with all but six operating with a smaller general fund budget last year than two years earlier. Although state revenues are beginning to stabilize, budget gaps are expected to persist for years, as federal stimulus funds fade and more people hit hard by the recession turn to social services provided by states.

Deciding how to address those shortfalls while preserving important services will be among the defining issues for many state leaders over the next few years, the report said.

Most of the survey's respondents think states could save as much as 20 percent a year simply by eliminating waste - a figure the report indicated was unrealistic. Respondents said the next best option for balancing budgets is cutting programs - although four out of five respondents also said they are concerned about how cuts will affect services.

"Too often, elected officials haven't taken the time to explain how the business of government all works and how we get to the next steps," said Mark Baldassare, president and chief executive of the Public Policy Institute of California. "They are going to have to sit down and level and explain and help the public understand what's needed."

Survey majorities did leave open the prospect of paying more taxes for services they value most - namely K-12 education and health and human services. But the results made it clear that to impose significant new taxes, state leaders would have to overcome a wall of distrust. Two-thirds or more of respondents across all five states said they either never trust state governments to do what is right, or trust them only sometimes.

States should raise revenue by taxing the wealthy and corporations or by imposing taxes on smokers, drinkers and gamblers, the residents said. But the report says those revenue streams are unlikely to close state budget shortfalls.

The survey also found that residents are against borrowing. Overwhelmingly, they said, they preferred either more taxes or more budget cuts over more debt.


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