Northeast States Trim Work Forces, Cut Budgets to Reduce Red Ink

AS the Northeast continues to lead the downturn in the United States economy, state governments find themselves inundated by a flood of budget deficits. The red ink keeps flowing in every state in the region despite hefty tax increases and spending cuts. Most states rely on a sales tax or a mixture of sales and income taxes to provide the bulk of state revenues. When the economy declines, slowing business activity and lowering personal and corporate income, state revenues are directly affected.

Here in Massachusetts, Gov.-elect William Weld (R) already faces a deficit of $250 million to $600 million in the fiscal year that ends in June. While he has not yet announced details of his proposals, he will recommend a comprehensive downsizing of state government as part of his package to eliminate red ink.

Meanwhile, other states in the region are struggling with similar problems:

New York. Lawmakers in Albany Dec. 13 approved spending cuts proposed by Gov. Mario Cuomo (D) to offset an estimated $1 billion deficit. The measures trimmed state aid for schools by $190 million, cut 6,000 state jobs, and reduced the size of a recently approved hospital bailout plan. Financial aid for state university students was cut, while tuitions were increased.

Even with the cuts, the state comptroller is expected to announce a new deficit this week.

Meanwhile, New York City Mayor David Dinkins (D) is struggling with a cumulative $638 million deficit. City agencies have cut spending by 20 percent, and 15,000 city jobs are being eliminated.

New Jersey. With a $450 million shortfall in sales-tax revenues, the state Treasury Department last month projected $600 million in red ink by the end of the fiscal year in June. Gov. James Florio (D), already under fire for tax hikes following his election last fall, is proposing freezing capital construction, reducing purchases of new equipment and employee travel, and laying off or furloughing state workers.

Connecticut. Gov.-elect Lowell Weicker, a former Republican US senator who is now an independent, is looking at a projected $500 million deficit for this fiscal year. The New York Times reported Dec. 13 that the budget deficit is already projected at $1.5 billion for the fiscal year beginning July 1. According to some estimates, by the end of fiscal 1992 the accumulated deficit will equal 30 percent of the state's general fund. Some observers are beginning to question whether the state should institute an income tax to accompany its 8 percent sales tax.

Maine. A projected $111 million shortfall has led Gov. John McKernan (R) to propose borrowing $73 million from the state's teacher pension fund. The administration is preparing contingency plans to trim 15 percent from state spending. The state finance commissioner estimates that 1,000 of the state's 13,000 employees may have to be laid off because of cutbacks that will be required in the next two-year budget.

Vermont. Deficit estimates for fiscal 1991 start at $36 million. Gov.-elect Richard Snelling predicts a $150 million deficit for the next fiscal year, which would require spending cuts of 22 percent.

Pennsylvania. The Keystone State faces a $1.5 billion shortfall, leading Gov. Robert Casey (D) to propose a series of spending cuts.

In another sign of the region's economic woes, a report released last week by the Federal Deposit Insurance Corporation showed banks in eight Northeastern states among the top 10 money losers in the third quarter of 1990. Massachusetts banks were in first place, with $216 million in losses.

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