States avoid tax hikes

NCSL State Budget and Tax Actions 2003

In the midst of the worst fiscal crisis in decades, state governments have used rainy day funds, specific fee increases and spending cuts to balance their budgets without relying heavily on broad tax hikes, says a report issued this week by the National Conference of State Legislatures.

The report includes information from 43 states, and indicates that states collectively have had to close a $200 billion budget gap over the past three years. Six states — Alabama, California, Connecticut, Nevada, Oregon, and Pennsylvania — had not enacted their budgets in time for the report, and Michigan had just finished passing its budget.

The report, released Wednesday in San Francisco at the legislature group's annual conference, said 42 states raised taxes and fees in 2003 to get an additional $10.6 billion that year. This is the second straight year for such increases, which now affects FY2004 revenues. In other budget-balancing moves:

* 31 states cut spending, including: 14 that imposed across-the-board cuts ranging from Texas's 1.5 percent to Minnesota's 15 percent;

* 15 that targeted corrections and Medicaid;

* 13 that targeted higher education and 11 that cut K-12 education.23 states reduced staff, including 11 that laid off workers.

* 13 tapped into rainy day funds, while eight used tobacco settlement funds.

* 11 states delayed capital projects or issued bonds to pay for them.

* Six states expanded gaming.

While the report did not specifically mention technology, budget experts speaking at the National Association of Chief Information Officers mid-year conference earlier this year said many technology budgets were cut and projects were placed on hold.

Next year, things may improve. Wednesday's report indicated state fiscal officers predict revenues will bounce back in fiscal year 2004.

In a separate conference session, David Wyss, chief economist with Standard & Poor's, said the economy is recovering, but at "half-speed or two-thirds speed" than previous recoveries. "That's all we're going to get," he said. "The 90s are over. Get over it."

However, he said the risk of recession remains if there are further terrorist attacks or war in the Middle East is expanded.