Governors Prepare For State Of The State

President Obama delivered his State of the Union address, but the nation's governors are just getting started with their State of the State speeches. But with budget shortfalls in the billions, they are focusing on how to rein in spending and raise revenues. Colorado Gov. John Hickenlooper and Sue Urahn, managing director of the Pew Center on the States, offer their insight.

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GUY RAZ, host:

We're back with ALL THINGS CONSIDERED from NPR News. I'm Guy Raz.

The State of the Union may be over, but the State of the State addresses, those are the ones given by governors each year, have just begun.

California's Jerry Brown and Wisconsin's Scott Walker deliver theirs this weekend. If you've heard any of the others so far, you might have noticed the theme.

Governor ANDREW CUOMO (Democrat, New York): What is the State of the State?

Governor SUSANA MARTINEZ (Republican, New Mexico): We must not sugarcoat it.

Governor RICK SNYDER (Republican, Michigan): We're in a crisis unmatched...

Gov. MARTINEZ: New Mexico...

Gov. SNYDER: ...in the last 60 years of our state.

Gov. MARTINEZ: ...is in a state of financial crisis.

Governor JOHN HICKENLOOPER (Democrat, Colorado): We have to deal with a roughly $1 billion shortfall.

Governor BRIAN SANDOVAL (Republican, Nevada): My budget recommends the consolidation, elimination (unintelligible) agencies.

Governor SAM BROWNBACK (Republican, Kansas): ...$191 million in spending cuts.

Gov. CUOMO: This is a time of crisis for our state.

Governor CHRIS CHRISTIE (Republican, New Jersey): We cannot continue to spend money we don't have.

Gov. MARTINEZ: No more shell games. No more rosy projections.

Gov. CHRISTIE: We cannot print money, and we cannot run deficits.

Governor NIKKI HALEY (Republican, South Carolina): This budget year is going to hurt.

RAZ: Grim sounds from some of the recent State of the State addresses. We heard from the governors of New York, Nevada, New Mexico, Michigan, South Carolina, Kansas, New Jersey and Colorado.

States are bracing for massive budget cuts. In Colorado, for example, the budget gap is more than a billion dollars, and many school districts there are already on a four-day week.

I asked the governor, John Hickenlooper, to give us a sense of his predicament.

Gov. HICKENLOOPER: Well, without a question, this is the most serious recession in my lifetime. And most of the people here in the statehouse are saying they haven't seen anything like this in, you know, in 75 or 100 years.

RAZ: Now, unlike the federal government, Colorado, like most states, is not allowed to run deficits. It is also very difficult to raise taxes in Colorado. So is your only real option at this point to make cuts that may be drastic?

Gov. HICKENLOOPER: Well, in fact, you're right. The legislature can't increase taxes. It has to go to a vote of the people. And that's, in this economy, certainly unlikely. And what that really means is certainly for a fact in this legislative session is the only solution we have is cuts.

You can't borrow. You can't put it off till tomorrow. We just need to gather everyone in a circle and say, all right, here are the options, and here are the legitimate consequences. If we cut this much out of higher education, here's how they're going to feel it in classrooms.

RAZ: You have a close to 9 percent unemployment rate in Colorado, by no means near the top of the list in the United States, but still, obviously, significant. Do you think that folks in Colorado have a full understanding of what they are about to encounter over the next year or two?

Gov. HICKENLOOPER: No, I think most people are hoping that the economy will get better more rapidly than I think it will, hoping that we won't come to that point, which we're already at, that we are going to have to make the cuts.

Part of the difficulty is to make sure that we tell that message and explain what the cuts are going to look like, how they'll feel, what will they see in their daily life.

RAZ: In a sense, Governor Hickenlooper, are you in a position where, say, the economy does not improve in the next year or two, and you are the guy who signs this budget with these cuts, that you may actually be blamed for cutbacks in state programs?

Gov. HICKENLOOPER: Well, elected officials get blamed for things all the time that aren't their fault or responsibility. As mayor of Denver, I got blamed for snowstorms, you know, the list is long.

I think the key here is to focus people's attention as clearly and rapidly as possible that if you're not going to raise taxes, and these are very difficult cuts, the one thing you could do is to be more pro-business. And because this is Colorado, we want to make sure that we hold ourselves to the highest environmental standards to make sure we protect our land and waters, the highest ethical standards. But we've still got to be more pro-business.

In my inaugural address, we talked about - and the State of the State speech -maybe we should have, instead of - just as we have an environmental impact statement, maybe we should have a regulatory impact statement.

If the legislature is going to impose new regulations on business, let's take the time to examine what the unintended consequences might be and so that we don't create red tape, and that's part of how, I think, you get through the budget deficit is to cut red tape, help each small business hire that extra person.

RAZ: Governor Hickenlooper, most states pass a new budget each year. The federal government passes a new budget each year. You have talked about building a budget every two years. How would that help improve Colorado's fiscal situation?

Gov. HICKENLOOPER: Well, so many of the challenges we face in the budgeting stem from not sufficient planning. You know, when I ran my restaurants, we would never just do a one-year budget. We always had a three-year budget or a five-year budget, you know, some sort of a planning document that tried to anticipate unexpected costs, be ready for opportunities should they appear. I think the state should be doing the same thing.

RAZ: That's Colorado Governor John Hickenlooper, speaking to me from his office in Denver.

Governor, thank you so much.

Gov. HICKENLOOPER: You bet.

RAZ: Sue Urahn is the managing director at the Pew Center on the States. And she says even before the recession, many economists, including those from the Government Accountability Office, predicted the fiscal nightmare that most states now face.

Ms. SUE URAHN (Managing Director, Pew Center on the States): There are some really significant factors that predate the recession. GAO did a report. They looked out over 50 years at what the fiscal situation of the states was going to be. And what they found was over that very long time period, there was going to be a $10 trillion gap that states would face.

And a lot of that was because of the increasing cost of health care. The cost of education is going up. What they are obligated to pay for their public employees' pensions and post-retirement benefits, those are fairly significant.

So those cost pressures are going up no matter what the states do, and the revenue is just not keeping pace.

RAZ: What can governors or legislatures do in the various states if they can't, say, raise taxes, for example, because voters have to approve tax hikes, or if they can't run deficits? Is it about cuts at this point?

Ms. URAHN: Really, at this point, given the public has not much appetite for tax increases, you've got at least a dozen new governors who have taken a no new taxes pledge, it's limiting in many cases what they can do and will focus them on spending cuts.

RAZ: So in a state like Colorado, where the legislature essentially has to cut about 15 percent of its budget, how would the average person in Colorado see that impact in the coming year?

Ms. URAHN: It may be everything from parks may not be open or even part of the public realm anymore. You may find that your driver's license office is only open three days a week instead of five, or you have to do it online now.

The court system may become far less efficient as there are fewer public employees to staff it. Your class sizes may get larger in the K-12 system. Your college tuition may go up pretty considerably. That's some of the impact, I think, the public will feel.

RAZ: Which states are in the deepest trouble financially? Which states will have to sort of overcome the biggest hurdles to get out of their situations?

Ms. URAHN: Well, there are several states that are facing pretty severe stress. I think Illinois has been much in the media of late. They are certainly under a lot of stress. California. You have states like Nevada and in Arizona. Nevada is, you know, the total size of the budget gap may not be big relative to the big states like New York, Illinois and California, but it's half of their general fund budget.

RAZ: How much does this present a risk to the full economic recovery that we're all hoping for and expecting?

Ms. URAHN: It is tremendously important for people to understand that the decisions that states make, whether on the spending or the revenue side, do have the potential to impact the national recovery.

You cannot make decisions at the state level absent that consideration. So the more that people are able to really understand the intertwined nature of those decisions, I think the better decisions are likely to be made in the long run.

RAZ: That's Sue Urahn. She's managing director at the Pew Center on the States.

Sue, thank you so much.

Ms. URAHN: Oh, you're very welcome.

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