A majority of state governors are taking drastic measures to trim current-year budgets that are dangerously out of balance, according to a survey released yesterday.
Faced with steeply rising costs and shrinking opportunities to raise revenue through new or increased taxes, state lawmakers predict bleak fiscal times this year and next. As state legislatures reconvene and governors leave their inaugural balls, at least 28 states -- including Maryland and Virginia -- are struggling to offset a total of $10 billion in potential budget shortfalls, according to the study by the National Governors' Association and the National Association of State Budget Officers.
District officials predict a corresponding shortfall for new Mayor Sharon Pratt Dixon, and six more states could join the list in coming months, according to Gerald H. Miller, director of the budget officers' group.
"Governors do have to make hard choices," Miller said. "They are between a rock and a rock out there, because they do have to balance their budgets."
The majority of the critically affected states are east of the Mississippi, but the geographic boundaries of fiscal stress are disappearing: Colorado, California and Arizona all report shortfalls of 3 to 5 percent of general fund appropriations.
"Not only do we have a problem on the revenue side," Miller said. "We also have a problem on the spending side." States that accumulated sizable rainy-day funds during the 1980s devoted much of the surplus revenue to new programs in education, corrections and health care -- expensive areas that keep demanding infusions of government money.
Governors are facing unsavory political consequences for their efforts to dissolve the worst round of budgetary red ink that many have faced since the recession of the early 1980s, and most have all but rejected tax increases as a solution, state officials said.
"I think you're going to see taxes substantially off the table next year," said Raymond Sheppach, executive director of the National Governors' Association.
Instead, the governors have turned to freezes on hiring and travel and to across-the-board spending cuts, trying to spread the pain as broadly as possible.
Sheppach said most governors cite the nation's economic downturn as the main reason for their budget woes. The recession that the Bush administration is now beginning to acknowledge began three months ago for the states, he said.
The economic slide has accelerated because of the federal government's shift to the states of spending responsibilities for indigent health care and welfare. As the economy slows and unemployment rises, these governors say, the need for government aid increases. At the same time, the states are trying to pay for promised education programs and steadily expanding corrections needs.
Sheppach said Medicaid is an "inefficient" way of delivering health care and that governors will call for a restructuring of the joint federal-state program when the Governors' Association meets here next month.
Even the most optimistic recession forecasts -- which predict a three- or four-month economic downturn before the economy corrects itself -- assume that future growth will be slow, and that means future problems once this year's budgets are balanced.