Checking In With Three States In Budget Limbo

Despite a requirement that states balance their budgets each year, it's not unusual for a few to miss the deadline. This year, deficits caused by the recession made eight states late. Two states — Michigan and Pennsylvania — still don't have budgets, and Arizona only has funding for part of the year. Rick Pluta reports for Michigan Public Radio, Susan Phillips weighs in from Philadelphia, and NPR's Ted Robbins reports from Tucson.

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At more than $1 trillion and counting, the federal deficit has set a new record this year. Many states don't have the luxury or running big deficits. They're required to balance their budgets - pretty hard to do in this recession. Plus, with more people out of work, the need for social services has placed further strains on those budgets. We're going to spend the next few minutes visiting several of these states. Michigan is one. The unemployment rate hit 15 percent this summer. A number of other states missed their budget deadlines this year. We'll begin with one of them - Arizona, which only has funding for part of this year. NPR's Ted Robbins reports.

TED ROBBINS: Students at the University of Arizona are enjoying a warm, sunny afternoon between classes, and federal stimulus money has allowed many of those classes to keep going. But financially, that's about the only good news here. Because of the state budget deficit, the U of A has cut nearly 600 faculty and staff positions. It's eliminated some degree programs, and it's merged others. In many cases, even the research dollars have dried up.

Mr. MARSHALL VEST (University of Arizona): The declines that we've seen are simply stunning. In 30 years this never happened before.

ROBBINS: Marshall Vest heads the Economic and Business Research Center at the University of Arizona. When he says that the declines are stunning, he's also talking about revenue for the entire state. Arizona is heavily dependent on its idle home construction industry. Sales and income tax receipts are way down, so the legislature has been talking about selling state buildings and leasing them back, borrowing money, cutting whatever it can. But Vest isn't optimistic.

Mr. VEST: I mean you could lay off every state employee and not even begin to balance the budget. You could defund the universities, for heaven's sake, and not even begin to balance this budget.

In fact, unemployment insurance for laid off workers is putting an even bigger strain on Arizona's budget, along with increased need for Arizona's version of Medicaid, K through 12 education, and prisons. Republican Governor Jan Brewer has vetoed portions of the state budget, including cuts to education.

Governor JAN BREWER (Republican, Arizona): We need more revenues to get this turned around.

ROBBINS: Brewer wants the Republican-led legislature to put a temporary sales tax increase on the ballot. If it passed, that would raise about a billion dollars a year, a third of the ongoing deficit.

Gov. BREWER: It's the right thing to do and I happen to trust the voters.

ROBBINS: The legislature has so far refused to consider raising taxes. Legislative leaders say this is an opportunity to slash government spending. Right now, Arizona has enough of a budget to fund government until January. Ted Robbins, NPR News, Tucson.

SUSAN PHILLIPS: I'm Susan Phillips in Philadelphia, and Pennsylvania is now into its 11th week without a budget and it's taking a toll on social service providers. At Avenue Child Care in South Philadelphia, eight-year-old Francesca Huff(ph) is playing with her baby brother.

Ms. FRANCESCA HUFF: Come on, open the window. Open the window. Want to play with blocks now.

PHILLIPS: But Francesca and about 50 other kids here may have no place to go if the state's budget impasse continues. That's because the majority of their parents rely on state subsidies, which Pennsylvania has not paid since July.

Mr. JONANNE REGLOBOOTO(ph): I'm angry because the governor is still getting his paycheck. He's still feeding his family. We're not feeding our families anymore.

PHILLIPS: Joanne Reglobooto owns the day care center and says she has not been able to pay her workers for two months now.

Ms. REGLOBBOTO: Well, we're ghetto people. What do we have? We don't have bank accounts, savings accounts, you know, pension plans, we can't withdrawal. We can't go to the bank (unintelligible) a loan.

PHILLIPS: She says three workers have quit and most of the others are behind on their rent and mortgages. Parents worry about losing child care if the center has to shut down. Jonathan Mattos(ph) is a single parent who just recently found work. His two-year-old son loves being here.

If I lose child care, I'll have to go back into a shelter. I mean me and my son lived in a shelter for close to a year before I did get this job. So losing that would be - a really bad thing.

PHILLIPS: State legislature leaders say they have come to a bipartisan agreement on the nearly $28 billion budget. But Democratic Governor Ed Rendell says the deal, which raises taxes on cigarettes and cuts his increases in education spending, is a phony budget, one that depends on overly optimistic revenue projections. He says he will veto the bill.

Governor EDWARD RENDELL (Democrat, Pennsylvania): There is no indication that we will have an increase in revenue this year. In fact, there are counter indications.

PHILLIPS: It's widely expected that lawmakers will override the governor's veto later this week, but for now, Pennsylvania remains the only state without a budget. For NPR News, I'm Susan Phillips in Philadelphia.

RICK PLUTA: This is Rick Pluta in Michigan, where, unlike Pennsylvania, the state officially has 15 more days to wrap up its budget. But an impasse in budget negotiations is already posing a hardship on cities, public universities, community colleges and school districts. That's because they all have fiscal years that began in July and they rely heavily on state funding. Governor Jennifer Granholm and the state legislature are struggling to erase an almost $3 billion deficit.

That's caused uncertainty for thousands of college students and their families. One of the programs that could be cut is Michigan's universal $4,000 scholarship for every student who graduates from high school and completes two years of college or career training.

Ms. LAURA DAZIE(ph) (Michigan State University Student): I mean it's scary.

PLUTA: Michigan State University student Laura Dazie says she's confused by the conflicting stories she's hearing out of the state capital. She's paying for school by working and taking out student loans.

Ms. DAZIE: I need the money. Like, my parents both don't have - we don't have family money or anything, and I know both my parents, their hours keep getting cut more and more and I have two other older sisters who they're still paying off their college stuff too.

PLUTA: Saving that scholarship is one of Democratic Governor Granholm's top priorities, but many Republicans argue it's a luxury the state can no longer afford, and Senate GOP leaders say they won't raise taxes. The situation bears a striking resemblance to a budget standoff in 2007 that culminated in a brief predawn government shutdown on October 1st. Granholm wants to avoid a rerun of that drama. She says things are not quite so dire this time around because of federal stimulus money.

Governor JENNIFER GRANHOLM (Democrat, Michigan): There is no need - no need at all - to shut down state government. This is a different scenario than existed in 2007. We have cash flow because of the stimulus dollars, so shutting down should not be an option.

PLUTA: But stimulus funds won't cover the entire shortfall. The governor's called for new taxes on things like bottled water and for reducing tax breaks for businesses and for working poor families to help make up the difference. That's similar to what's happening in other states struggling with politically unpalatable solutions to budget problems.

For NPR News, I'm Rick Pluta in Lansing, Michigan.

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