Conn. and Pa. state budgets still in limbo

August 30, 2009 11:55:25 AM PDT
A program that helps thousands of Connecticut welfare recipients find work has been in limbo for two months. Family resource centers, which provide child care, adult education, and other services, have shut their doors. In Pennsylvania, day-care centers have laid off workers. Some preschool programs are scrapping plans to reopen in September. And tens of thousands of state employees had to wait to be paid for several weeks.

While most states have already passed their budgets, Connecticut and Pennsylvania remain the only two in the nation still at odds over how to balance the books this fiscal year amid plummeting state revenues. Connecticut's revenue flow has dropped by $2 billion from last year while Pennsylvania's came in $3.3 billion less than expected.

"It's a symptom of a very severe recession that's caused some really difficult political choices to be made," said Scott Pattison, executive director of the National Association of State Budget Officers in Washington, D.C. "You happen to have two states that haven't happened to get it together."

While the fallout of not having a budget is similar, the political dynamics at play in the two states represent opposite sides of the same coin.

In Connecticut, a Republican governor, M. Jodi Rell, has insisted more spending cuts are needed and a Democratic-controlled General Assembly wants higher income taxes on the wealthy to help cover the deficit.

In Pennsylvania, Democratic Gov. Ed Rendell insists that he and his Democratic allies have already put bone-deep cuts on the table and want to bridge the remaining deficit with additional taxes. Republicans - who control the Senate with a commanding majority - insist more spending reductions are needed.

Other states with daunting deficit problems also went into fiscal year-overtime before finally passing their budgets. California had to issue nearly 210,000 IOUs worth about $1 billion to pay vendors and contractors until a budget was signed. Ohio was forced to resort to weeklong spending plans, which threatened services and created administrative headaches, after leaders failed to reach a compromise before the fiscal year ended June 30.

But it appears that just passing a new budget doesn't guarantee that a state's fiscal woes have been solved.

The debate that's going on in Connecticut and Pennsylvania, Pattison said, will likely be replayed in other states in the coming months. Many, such as California, Arizona, Illinois, Virginia and Maryland, are already revisiting or are likely to revisit their budgets so they can adjust them to newer, lower revenue figures.

Meanwhile, in Michigan, where the fiscal year begins Oct. 1, officials facing a $3 billion deficit are struggling to get the budget done and avoid a government shutdown.

In Connecticut, hopes are high that a budget deal might be reached before the end of the month now that Rell has agreed to raise income taxes on individuals earning $500,000 a year or more, and joint filers earning $1 million or more. For months, Rell has opposed changes to the income tax, but said she hoped her about-face would break the stalemate.

"I want a budget and I want it in place by Sept. 1," Rell said. "We need a state budget. We need to fund critical programs and services, and we need to bring an end to the uncertainty and we need to end this stalemate."

If a new budget is passed, Cynthia White, 45, of Bridgeport, hopes the state can resume funding for the STRIDE program, which helps ex-offenders find employment and reunite with their families. Out of prison since February 2008, White said she was devastated to learn in late June the program was on hold.

"It's like we're family. We became family. They contact you constantly, they want to know about how you're doing," she said. "They care about us."

A budget deal doesn't appear imminent in Pennsylvania.

Rendell, who just completed a yearlong stint as chairman of the National Governors Association, blames Pennsylvania's failure to get a comprehensive budget deal in place on the resistance to his cuts-and-taxes approach.

"If you look at those other states, the ones with the most significant deficits all did a balance of cuts and revenue increases," he said last week. "We need to do the same, and the reluctance to do the same has caused us problems. And I think we're now beginning to realize we need to do the same."

Erik Arneson, a spokesman for the Senate Republicans in Pennsylvania, frames the debate as a choice between cutting spending to match revenues, which his party favors, and increasing spending and then raising taxes to pay for it, which is how he characterizes Rendell's approach.

"With two such divergent points of view," he said, "there is no natural middle ground as there has been in previous budget years."

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Associated Press writer Mark Scolforo in Harrisburg, Pa., contributed to this report.


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