Even if the U.S. economy were to turn around by the end of the year, states are worried their own fiscal conditions will get worse before they get better. Several governors shared their concerns for the new budget year that began July 1 with Stateline.org during the National Governors Association’s July 17-20 meeting in Biloxi, Miss. Their responses reflect how individual states’ economies differ widely, but how their fortunes are tied closely to a national recovery.
Many states had to cut spending or raise taxes because of the recession. Fears are that budget conditions will get even worse. What is your biggest concern in the coming year?
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| Vermont Gov. Jim Douglas (R) |
I agree with the economic analysis that often the year after a recession technically ends can be worse fiscally (for states) because it takes a while for people to sign up for benefit programs. It takes a while for jobs to be created. It takes time for people's income to rebound. I'm quite concerned that next year may be very challenging. I think the biggest threat facing states is what Congress might do in terms of not funding mandates in a health care bill. ... Governors are interested in seeing meaningful health care reform, but it has to happen in a way that doesn't put states at a greater budgetary disadvantage.
—Vermont Gov. Jim Douglas (R)
Jobs and job creation. Our economy is actually better off than many other state economies. Our unemployment rate is 7.6 percent and has been relatively flat since March 2009. That's good news. There are many other parts of the country that are in worse shape, and they could actually cause us to be steeped in this recession. We may have a more difficult time finding the turnaround because the economy in other parts of the country is in such trouble. California is probably the most notable example. We're hoping the turnaround is coming at the end of this year. My biggest concern is that it may be delayed.
—Colorado Gov. Bill Ritter (D)
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| South Dakota Gov. Mike Rounds (R) |
Part of our problem is that the federal government, in what I truly believe was a serious mistake, re-crafted what the Federal Reserve attempted to do (to reform credit card practices.) They created six new rules in an expedited fashion – five of which were fine. The sixth rule literally will shut down what they call the subprime credit card market. There are approximately 70 million of those credit cards throughout the United States. There is a strong possibility that in the next 12 to 18 months, those will probably be gone. We have a number of financial institutions that offer those. … Those credit card companies have not found a way yet to do business under the new guidelines that Congress has now put into statute. So we see that as a significant impact. We think it’s going to hurt our employment numbers because we have between 3,000 and 5,000 jobs still at risk, and whether they can find another business model to employ those people, we don’t know. But it’s not looking very good right now.
—South Dakota Gov. Mike Rounds (R)
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Washington Gov. Chris Gregoire (D)
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My budget was difficult this year. But I didn’t have to raise revenue, and I got it out in time. I filled a $9 million projected deficit. But two years from now? That’s what keeps me awake. Potentially I won’t have federal stimulus dollars. And everyone predicts the states will delay in their recovery, and the news we hear is that we will be slow to recover. My greatest fear is what in the world will the states do in the next biennial budget – I’m a biennial budget state – in 2011? I don’t talk about it back home, but that’s what keeps me awake at night. It’s getting through the year, getting the recovery going as quickly as possible, readying us now to get out of it as strong and swift as possible. Otherwise I fear, and if there is no federal help at that point, I think the states will be in worse shape than they are now.
—Washington Gov. Chris Gregoire (D)
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Georgia Gov. Sonny Perdue (R)
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Our primary concern now is bottom-line revenue … and how we allocate it. We're looking for the economy to turn around, for job creation to begin. And the fact that you hear anxiety is because some state budgets will lag economic turnaround by nine to 18 months. … We're been very encouraged by our Department of Economic Development that we have serious prospects looking for re-investment and re-locations. That would be good news. We have the wonderful psychological impact of NCR (a technology company) announcing its relocation to Georgia of their global headquarters. We think there are others looking for these kinds of opportunities in the future, and we welcome them in Georgia.
—Georgia Gov. Sonny Perdue (R)
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Wyoming Gov. Dave Freudenthal (D)
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We just did a 10 percent reduction. We will in January adopt a biennial budget. We expect that it will be thinner than this one. Our revenue base is largely minerals and mining, so the larger concern for us is the price of energy, more particularly gas and coal. … I think we're the same as everyone else. We have a different source (of revenue) that we capture, but we're all dependent on the nation's economy. So even though the recession got later to a state like Wyoming, we're cutting back like everyone else and that's what we'll continue to do.
—Wyoming Gov. Dave Freudenthal (D)
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