Economy
Finances of U.S. States Called Worst Since World War II
By Robert Pear: New York Times
Nov 28, 2002, 11:41

Governors and state budget officers said the fiscal condition of the states
was more dire than the condition of the national economy.

"Nearly every state is in fiscal crisis," the governors said in a new
survey of the states.

Raymond C. Scheppach, executive director of governors association, said
the problems would affect people across the country. States, he said, are
increasing tuition at public colleges and universities, cutting Medicaid
eligibility and benefits, increasing taxes on individuals and corporations
and laying off state employees.

"You will see huge cuts in Medicaid," Mr. Scheppach predicted.

Medicaid and other health costs, like employee health benefits, account
for 30 percent of state spending and grew last year by 13 percent, the
largest rate of increase in a decade, the report said. At a time when
revenues are declining, Mr. Scheppach said, such growth is unaffordable and
unsustainable.

Relatively few of the newly elected governors have said precisely how
they will deal with these fiscal problems. "Most of them don't understand
how bad it is," Mr. Scheppach said.

In a new "Fiscal Survey of States," the governors association found that
"total state balances have plummeted by 70 percent," dropping to $14.5
billion in the current fiscal year, from a peak of $48.8 billion in 2000.
The current balance represents 2.9 percent of state spending, the smallest
cushion since 1992.

Total state tax collections fell by 6 percent last year, even as spending
grew 1.3 percent, the report said.

Most of the tax changes in the last year affected tobacco levies.
Nineteen states increased cigarette taxes, many by more than 50 cents a
pack.

Services account for a steadily growing share of state economic activity,
but states have found it difficult, for political reasons, to increase taxes
on services. Likewise, Mr. Scheppach said, "it's very hard to raise taxes on
middle-income Americans, when they don't have secure health insurance, to
pay for health care for low-income Americans."

The Bush administration has opposed bipartisan efforts in the Senate to
help relieve budget pressures on the states. Federal officials say they have
no money to spare at a time when the federal government faces growing
deficits, after four years of surpluses.

Mr. Scheppach cataloged some of the states' needs. Congress and the White
House had promised $3.5 billion to train and equip local police officers,
firefighters and rescue workers, but Congress adjourned without providing
the money.

Congress provided none of the money promised to states to help them buy
new election machinery and to train poll workers to comply with a new
federal election law.

On Oct. 1, states lost $1.2 billion that had been appropriated by
Congress to provide health coverage for low-income children. The money,
unclaimed after four years, reverted to the Treasury, and Congress did
nothing to restore the money despite pleas from states.

© Copyright or Used by Permission, ©2006 ChewinTheFat.com