Red Ink at the Statehouse

The notion of the United States today as a 50-50 nation usually refers to the balance between Republicans and Democrats nationwide. But it can be thought of another way, too - as the split between Americans who don't want their taxes raised and those who don't want to cut government spending.

Nowhere is this split more evident right now than in state capitals. State governments, facing their worst fiscal crises since the National Governors Association began keeping track in 1977, are wrestling with agonizing decisions as they develop budgets for the next fiscal year.

The struggle has stalemated the legislatures and governors of six states, which began their fiscal years last week with no final budget. Worst off is California, facing a tidal wave of red ink totaling $38 billion. (By comparison, the entire Massachusetts budget is $22 billion.) Connecticut, Nevada, New Hampshire, Oregon, and Rhode Island are in the same boat. Some passed temporary measures to keep state government operating, but Sacramento will run out of money in August. Pennsylvania lawmakers approved a budget in March, but still haven't enacted the bills to finance it.

Governors of 29 states are seeking to raise revenues; 28 states saw deep spending cuts over the past fiscal year.

The immediate cause of all this grief is the economic downturn of the past two years, which has ripped a hole in state purses. But a lack of discipline in statehouses didn't help: From fiscal 1998 to 2002, state spending increased in real terms an average 4.2 percent a year.

Even if revenue picks up with the recovering economy, the picture is sobering: State Medicaid costs are now rising at about 8 percent annually, which could eat up new revenues as fast as they come in.

Compounding the problem is that the 50-50 divide on tax cuts versus spending isn't always between Americans: Sometimes it's within Americans. It's not unusual for the same voters who don't want their taxes raised to complain when their favorite services are cut.

For several years now, a series of state referendums has made it clear that voters won't support increases in broad-based taxes such as those on incomes or sales. If that continues, governors and legislators must get the message and cut more government programs - perhaps some of those added during the boom years.

And if voters don't like that, they must get the message and vote to fund the programs they say they want.

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