News & Politics

Poor Pay for States' Woes

Thirty-seven states slashed their budgets by nearly $15 billion this year; the biggest spending cut in 27 years.
California's messy budget war is the buzz of the nation only because it's the nation's biggest and politically trendy state. Anything that happens in the state automatically makes national news. But other states also face monumental budget woes. According to the Fiscal Survey of the States conducted by the National Governor's Association and National Association of State Budget Officers, 37 states slashed their budgets by nearly $15 billion this year. That's the biggest spending cut in the 27 years that the group has surveyed state spending. It could be worse next year. Despite big deficits and a stagnating economy, state spending still managed to grow marginally this year. Next year the Fiscal Survey predicts that overall spending will drop.

The states have balanced their budgets by making deep slashes in programs and services, heavy borrowing, employee layoffs, offering early retirements to employees, and, of course, with hefty increases in taxes and fees. One of the taxes that state legislators have had to increase is the always unpopular and regressive sales tax. The tax slams poor and working people the hardest. But unlike in California, where Republicans and Democrats wage fierce trench war over increasing the sales tax, 15 states have either proposed or have raised their sales tax.

Republicans and Democrats in cash-strapped states, when not finger-pointing at each other, blame their budget free-fall on too little money to bankroll increasingly costly services and programs. That's true. But that lets the Bush administration and the corporate health care fat cats off the hook. The federal government demands that states provide more specialized programs in education and health care, election reform and homeland security, and annual educational testing. These are "un-funded mandates" and the Bush administration has not coughed up the billions needed to bankroll other mandated programs. The latest Bush tax giveaway to corporations and the wealthy virtually guarantees that the federal government will rack up even bigger deficits in coming years. This means that the Feds will have even fewer dollars to dole out to the states to fund services and programs. Then there is the badly fractured health care system.

Even in the golden years, health care for the poor and needy was always grossly under-funded. Since federal law mandates that the states provide basic medical services to all of its residents, the HMOs, medical associations, insurance companies and the pharmaceuticals have been the big winners. They have relentlessly driven medical costs through the roof, and have resisted every effort by state and federal legislators to fully rein in costs (and their profits.)

In California, Medi-Cal is the main government health program that provides health care services to the poor, whose numbers continue to grow. But with no state budget in place and no money to pay the bills, state legislators have threatened to stop Medi-Cal payments to nursing homes and clinics if the state fails to pass a budget. Thirteen other states have not gone that far but they have slashed spending on Medicaid.

The state's budget woes can be traced back a quarter century to the passage of California's Proposition 13. The measure, though billed as a populist revolt against tax and spend Democrats, was largely driven by conservative white suburban homeowners, big commercial property owners, and real estate interests.

It limited the amount of dollars that cities and counties could raise from property owners. Tax revolt quickly became the national rage, and other states passed their versions of Proposition 13 that put strict limits on property tax increases. This quickly pitted counties and cities against the state legislators and against each other in a mad scramble to divvy up the narrowing pool of property tax dollars to fund their projects and services. Legislators hungrily snatched the lion's share of the hundreds of millions of dollars in property tax money to balance their state budgets. The legislators held on to the money tightly and resisted the pleas of city and counties to fairly and equitably ladle out the shrinking tax revenue.

This forced many cities and counties to make a Hobson's Choice. Either cut local programs and services or hike user and service fees. In more cases than not they made no choice. They cut programs and raised taxes to balance their books. Some experts project that at the very least for the next three years states will continue to slash and burn programs and raise taxes to attain a semblance of fiscal normalcy.

Bush claims that an improved economy and his tax cut will ignite the economic miracle that will save the states from financial ruin. If the turnaround comes, and there is much doubt when or even if it will, the poor will have already paid, and paid dearly for the state's budget woes.

Earl Ofari Hutchinson is an author and political analyst. Visit his news and opinion website: www.thehutchinsonreport.com He is the author of "The Crisis in Black and Black" (Middle Passage Press).