Minnesota legislators will meet in emergency session today to decide whether they will raise taxes or allow 35,000 public employes to be laid off, hundreds of schools to be shut down and hospital staffs to be sharply reduced.
"This is not a threat," said Gov. Al Quie, who explained that the cutbacks will occur next Tuesday unless the legislature raises taxes. "It's the most irresponsible thing I could possibly do, but I am obligated by law to balance the budget."
Eight other governors also have called their legislatures into special session over the next few weeks to struggle with big budget deficits caused by the prolonged recession, which has swelled unemployment rolls and reduced tax revenue. Twenty-seven states have cut their budgets since July and eight others are considering cutbacks.
Indiana is moving to raise its sales and income taxes. Nebraska has cut hospital staffs, speeded up tax collections and raised the levy on local businesses. California borrowed $400 million from the Bank of America to help offset a billion-dollar deficit.
And for the first time, Texas and four other states have been forced to borrow from Washington to pay jobless benefits because their own unemployment funds have gone broke.
Nowhere is the impact more visible than in Minnesota, where legislators already have cut spending and raised taxes twice this year and still are facing a $312 million deficit. Despite Republican Quie's warnings, the Democratic legislature rejected a bailout plan earlier this week that would have raised an income tax surcharge from 7 to 10 percent, boosted the sales tax from 5 to 6 percent, cut employe salaries by 2 1/2 percent and slapped a new tax on long-distance telephone calls.
The lawmakers are scheduled to vote on a similar tax package today, which they have set as their final deadline.
"All the alternatives before us are so miserable that it may not be possible to get a majority of legislators to vote for any one of them," Joe Graba, an aide to the Senate Democratic leader, said.
"We can't cut pensions, we can't cut payments on bonds, we can't close down prisons or welfare offices," he said. "So we have to cut aid to schools, colleges, cities and counties."
When state aid was cut last February, for example, the city of St. Paul had to lay off about 100 police and fire officers. City officials said further reductions would mean still more layoffs and the immediate closing of some of the city's schools.
The recession also is taking its toll in affluent areas. Two years ago, Louisiana was awash in oil revenues and trying to parcel out a $500 million budget surplus. The legislature built new highways, cut the income tax in half and made sure anyone owning a house worth less than $75,000 didn't have to pay property taxes.
Now, however, depressed oil prices have choked off the energy revenues, unemployment has topped 10 percent and the state budget is $150 million in the red. Budget director Ralph Perlman said the state has cut spending more than 4 percent by eliminating what he called "giveaways," such as aid to charities that work with the handicapped and mentally retarded.
In addition, Louisiana is borrowing from the federal government for the first time to keep paying jobless benefits, which can reach $205 a week for 38 weeks. "We can't afford the same services as when we had the big oil windfalls," said state Sen. Tommy Hudson. "We have no more trump cards."
Post-election politics have muddied the picture in several states. In Indiana, Republican Gov. Robert Orr asked for hefty tax increases this week to make up a $452 million shortfall. "The recovery which experts told us to expect did not come," said Orr, warning of major layoffs and "devastating cuts" in aid to education.
But Democratic Sen. Michael Gery said: "The governor knew these problems existed and simply hid them until after the election. Suddenly a half-billion-dollar deficit appeared out of nowhere." He said Orr was resorting to "bookkeeping gimmicks" by trying to delay school aid payments until the next fiscal year.
In New York, it was the Republicans who scoffed when outgoing Democratic Gov. Hugh Carey warned that the state was facing a $579 million deficit. Now that new taxes are needed to close the gap and perform the annual bailout of New York City's transit system, the Republicans want to leave the problem for Democratic Gov.-elect Mario Cuomo, who promised not to raise taxes.
"Maybe they were right and we were wrong," said Charles Dumas, a spokesman for the Senate Republican leader. "But now they're just trying to get Cuomo off the hook. We don't feel there's any great urgency to it."
Other states holding special sessions are Utah, Kentucky and Mississippi.