State Budgets -- Update

TOTAL SHORTFALLS EXPECTED FOR FISCAL YEAR 2002:

Approximately $40 billion*

(as of January 25, 2002)

*This figure includes $5 billion estimated for security and public health costs related to homeland security that were not previously budgeted by the states.

State	Estimated Budget Shortfall	Comments
Alabama	$160 million	Gov. Don Siegelman is proposing a 3 percent raise for teachers. The proposed $1.19 billion General Fund budget for next year would be $19 million less than this year.
Arizona	$1.6 billion/2 years	Budget cuts of 4%. Governor is considering some targeted tax increases.
Arkansas	$19.7 million	Arkansas Gov. Mike Huckabee January 16th rejected a no-new-taxes plan crafted by lawmakers to patch critical holes in the state budget, offering instead a temporary fix. Huckabee said he would allow $2.9 million from the state's $1.6 billion tobacco settlement to be used to continue Medicaid coverage for 10,000 people in the program's "medically needy" category. The legislators proposed a more extensive bailout that would restore cuts in other Medicaid programs as well parts of the state budget cut by $142 million.
California	$12.4 billion	The governor’s budget proposal includes $5.2 billion in cuts ($2 billion of which were announced in November); $3.5 billion in bonds, loans, deferrals (such as delaying payments to state employees’ retirement funds) and increases in federal funding; and $143 million in new fees.
Colorado	$385 million	Revenues continue to come in under projections. Among the governor’s proposals to close the gap is to cut the reimbursements and fees paid to pharmacists who fill Medicaid prescriptions.
Connecticut	$200 million	Budget cuts and increased borrowing among options being considered.
Delaware	$25.8 million
Florida	$1.3 billion	Gov. Jeb Bush and the leaders of the Florida Legislature recently agreed to delay a controversial tax cut for 18 months and trim more than a billion dollars in spending out of the state's $50-billion budget. Probable cuts will be to education, human services and general government. A high priority of Gov. Jeb Bush is eliminating the intangibles tax on stocks and bonds. Recently, there has been increased attention on a proposed plan by Senate President John McKay of Bradenton to broaden the states tax base by taxing haircuts to overnight mail, and nearly 100 other services.
Georgia	2%/$600 million	This year agencies must cut 2.5% (roughly 215 million) and 5% for next year. Gov. Roy Barnes called for borrowing $1.3 billion, through bonds, to accelerate school construction, jump-start rural highway projects and build prisons. Barnes is also proposing a tax cut --- an expansion of the homestead exemption for property owners. The governor recommended raising pay for teachers and university faculty by 3.5 percent.
Idaho	$76 million	Cuts of $55 million have been made and the governor has asked to use $20 million of rainy day reserves. Spending on state construction has been frozen, as well.
Illinois	$400-$500 million	In November, Governor George Ryan cut $50 million from state agencies and announced that another 2% could be cut from state agencies to balance the budget. Illinois also implemented a hiring freeze, restrictions on travel, and a freeze on purchasing equipment for the state. The Governor also cautioned that the state might have to delay the opening of some prisons. After having cut Medicaid payments to hospitals, Governor Ryan restored $24 million in the Medicaid payments, but he will make up the difference by cutting $24 million in payments to doctors and dentists.
Indiana	$800-$950 million	On January 15, Governor Frank O’Bannon recommended cutting $700 million from the state budget. He also announced that the state must raise taxes in everything from cigarettes to riverboat gambling. Earlier, the Governor had cut 700 state jobs. Late in 2001, the Governor implemented a state hiring and wage freeze. Also on January 15, the Governor unveiled his 21^st Century Tax Plan. The plan would cut the state property tax by 20%. However, the state sales tax would increase from 5 cents to 6 cents. The Indiana top income tax rate would increase to 4.2%. In addition, the Governor proposed increasing the hiking and camping fees in the state.
Iowa	$203 million	In November, Governor Tom Vilsack announced 4.3% budget cuts in most state agencies. As of January 21, 2002, state revenue collections were down 1.2% from the same time last year. The Governor has already cut $186 million in this year’s budget, although wants to boost education spending by $48 million. To keep young people in Iowa, the Governor wants to offer college graduates a tax credit against their income to pay for college tuition. The Governor also wants to maintain funds for early childhood programs and the Healthy and Well Kids in Iowa Program.
Kansas	$426 million	On January 14, Governor Bill Graves proposed an increase in the state’s cigarette, motor fuel and sales tax that will save Kansas $228 million. The Governor also proposed to restore $91 million to maintain K-12 education programs. He also proposed to restore $27 million to the state Board of Regents for higher education programs. Also, $3 million is to be restored for mental health programs and $1.5 is to be restored for developmentally disabled programs. Earlier, the Governor had proposed cutting some of these programs to balance the state’s budget. The motor fuels tax will enable the state to implement the Comprehensive Transportation Plan set to begin in 2003.
Kentucky	$533 million	Gov. Paul Patton’s budget provides a modest boost to education but holding most services to current spending; leaves public schools with no funding increase until the second year but requires local school systems to pay teachers a 2.7 percent cost-of-living raise next year. It also freezes state Medicaid spending at its current level, has no money for state-funded construction projects and uses reserves to help cover budget shortfall. The state is currently trying pass legislation that will enhance state revenues by allowing slot machines to be placed at thoroughbred racetracks.
Maine	$86 million
Maryland	$500 million	The state is initiating a hiring freeze, canceling new construction projects. Gov. Glendening seeks to spend about $800 million of the state's $1.3 billion in reserves. Maryland faces a bill of close to $20 million for security upgrades, including tightened restrictions at the State House and a new radio system. In-state tuition at Maryland's public colleges and universities could go up by as much as 5.5 percent in the fall to help cope with the state's fiscal stress.
Massachusetts	$1.35 billion	Spending cuts, use of reserve funds, use of annual tobacco settlement funds among options being considered. Hiring frozen.
Michigan	$1.4 billion	To help reduce the state’s mounting budget shortfall, Governor John Engler announced that a $116 million tax cut scheduled to take effect in 2003 for businesses in Michigan has been cancelled. In addition, a very popular program allowing elderly care at home rather than in nursing homes, has been frozen. Also, a 1% income cut scheduled for the coming year has been delayed. Construction on Interstate 94 in Detroit may also have to be delayed to save money. State aid to local public schools may also have to be put on hold. The state may have to tap this year’s tobacco settlement installment to keep government services afloat.
Minnesota	$357 million	On January 3, Governor Jesse Ventura announced that if the legislature failed to cut the budgets of state agencies, he would use his executive power to make the cuts himself. Cuts to education, social services, and aid to cities and counties could all be on the table. The Governor has also proposed raising the gasoline tax in Minnesota from 20 cents to 25 cents with the money going to the state General Fund, not the transportation trust fund.
Mississippi	$80 million	Many state agencies must shave 3.35 percent from their budgets, a total of $55 million. Some departments, such as Education, Medicaid and Mississippi Emergency Management Services, received smaller cuts or exemptions. Medicaid is expected to run out of state dollars in February. The Gov. is expected to outline his budget plan on January 25.
Missouri	$536 million	On January 23, 2002, Governor Holden laid out his recommendations for eliminating $480 in state programs and 688 full-time jobs in a joint session of the House and Senate. Extra revenue will be sought with tobacco settlement money, funds from the state’s budget reserve and new gaming revenue from high-stakes gambling in Missouri. Funding for state universities, however, would fall $97.6 million for the year beginning July 1, and state employees would have their wages frozen for the second year in row. Missouri will experience the first decline in general fund appropriations since 1992. Twenty-one state programs will be eliminated. The governor will use $135 million of the state’s rainy day fund to balance the budget. The Governor, however, will preserve $220 million for math and reading programs in the state.
Nebraska	$57+ million	In a special legislative session in October, Governor Mike Johanns announced that Nebraska would implement 4-5% across-the-board budget cuts for some state agencies. The state legislature’s special session ended on November 8, 2001 with $171 million cut from the state’s budget in the next two years. On January 15, 2002, the Governor announced several new state initiatives to boost job creation and capital investment in the state. Those initiatives include: the Invest Nebraska Act and the Ethanol Development Act. The Governor also announced increased funding for early childhood development projects.
New Hampshire	$6.6 million	Spending cuts.
New Jersey	$2.4 billion	No tax increases.
New York	$3 billion
North Carolina	$700-900 million	Gov. Mike Easley remains committed to using Hurricane Floyd relief money for the storm's victims for temporary relief. State officials face $108 million more in expenditures than they expected in the Medicaid program this fiscal year, which ends June 30. They may have to find another $250 million to cover expected increases next year. Also, Tuition and fees at Chapel Hill have risen nearly 40 percent since 1999, and the bulk of the revenue has been spent on faculty salaries. With the state facing a $700 million to $900 million budget shortfall, campus trustees said they had little choice but to bump up tuition again.
Ohio	$725 million	Ohio’s budget shortfall is estimated to be $1.5 billion over two years. Soon, the Governor will take measures to address a $725 million budget shortfall in 2002 and a$788.6 million shortfall in 2003. Those measures include budget cuts of up to 6% in a number of state agencies, closing certain tax loopholes that businesses exploit, and tapping rainy day fund money. The Governor may also borrow $100 million in tobacco settlement revenues in fiscal 2002.
Oregon	$700 million/2 years	The governor has issued an “all cuts” budget (which he does not recommend) detailing cuts to state services—including $304 million from public schools—and using $20 million from lottery reserves.
Pennsylvania	$622 million
Rhode Island	$70 million
South Carolina	$500 million	Gov. wants each agency to cut costs by about 3 percent. But if agencies are unable to find that amount, they might be allowed to tap a reserve of slightly more than $100 million that is built into the budget each year. The state has implemented state employee layoffs and will tap rainy day fund to balance the fiscal 2002 budget.
South Dakota	$11.5 million	In early January, Governor Janklow predicted that there could be a $36 million shortfall in 2003.
Tennessee	$300-$400 million this year; $800 million to 1 billion next fiscal year.	As of January 25, State legislative leaders working with Gov. Don Sundquist to find $1.25 billion in new taxes for next year's state budget are using three yardsticks to find a tax plan: adequacy to fund the budget long term, ability to keep up with growth in personal income, and deductibility on federal income tax returns. Sundquist, who is in his last year in office, said he planned to present an ''investment budget'' in early February that ignores the projected $1 billion deficit.
Utah	$198 million
Vermont	$35 million	Budget cuts of 2% or $17 million and $5 million of contingency spending reserved.
Virginia	$1.3 billion	Gov. Warner’s budget maintains that state employees and school teachers forgo raises, the state car tax not be fully phased out until at least 2004, higher tuitions at Virginia colleges, and an array of state fee increases. Warner also called for across-the-board state agency spending cuts of 3 percent this year, 7 percent in 2003 and 8 percent in 2004, and he warned that more measures could be taken as the economy deteriorates and state tax receipts slide.
Washington	$1.25 billion/two years	The governor’s budget proposal cuts human services by $246 million; general government and natural resources funding by $41 million; higher education by $54 million; and discretionary public school spending by $29 million. It would also use $150 million in reserve funds.
West Virginia	At least $90 million	Gov. Bob Wise's proposed budget for the next fiscal year would use what could be the last big increase in lottery revenue, plus savings from a 3 percent spending cut, to fund new spending that's heavy on pay raises, social services and education. There is currently a projected $90 million hole in the state's welfare programs budget. Gov. Wise is expected to allocate $20 million to the Department of Health and Human Resources.
Wisconsin	$264.8 million	On January 22, 2002, Governor Scott McCallum announced an economic plan entitled the Budget Reform Act. One highlight of the plan is that there would be no new tax increases. The plan would reduce state spending in 2002 by 10%. The plan would also reduce state spending in 2003 by 11.5%. Wisconsin’s Corrections budget would be cut by 6%. The budget of the Wisconsin Technical College would be cut by 4.5%. And aid to local government would be cut by 4%. The Governor also proposes to borrow $794 million in the state’s tobacco settlement money to replace the portion of the shared revenue program that would be cut from local governments.