Washington, DC, USA. The financial crisis has led to an unprecedented number of states trying to close budget gaps as a new fiscal year starts today (July 1). Ten states tried Tuesday to close billions of dollars in budget shortfalls and approve new spending plans to avoid reducing government services or cutting off payments.

Only one — Indiana — was successful as lawmakers sent a $27.8 billion spending plan to Gov. Mitch Daniels (R), who signed it Tuesday night. The state had been preparing for a partial shutdown if a budget plan had not been in place by the July 1 deadline. Indiana had not missed a budget deadline since 1887.

STATES ON BUDGET DEADLINE

As of June 30, 10 states had not approved budgets for the fiscal year that begins July 1. Here are the states and the gaps they must plug to balance their budgets.

1. Arizona: 3.2 billion

2. California: $24.3 billion

3. Connecticut: $8.8 billion
4. Delaware: $800 million

5. Illinois: $11.6 billion

6. Indiana: no budget gap; House and Senate are split on the budget amount

7. Mississippi: $400 million

8. North Carolina: $4 billion

9. Ohio: $3.2 billion

10. Pennsylvania: $3.2 billionArizona was not as fortunate, though lawmakers said they planned to work into the night to avert a partial shutdown. State park rangers began asking campers to leave campgrounds Tuesday night.

California officials said they could be forced to issue IOUs because they may not have the money to pay all of the state's bills. Pennsylvania and Illinois would keep essential operations going, but a protracted stalemate could begin affecting day-to-day services in those states in a few weeks.

Shutdowns were not a threat in Connecticut, North Carolina and Ohio, even without a new budget plan in time, because those states have provisions to temporarily spend without a budget.

Ohio lawmakers approved the first temporary budget in 18 years Tuesday night, keeping spending going for at least a week as they try to reach a compromise.

Delaware and Mississippi round out the 10 states that did not have budgets approved before the start of the new fiscal year, though legislative leaders in those states said they were optimistic they would vote on a budget agreement in time.

The last time so many states blew the deadline was two years ago, when six states could not agree on a budget by July 1. The widening of the problem this year reflects a steady drop in tax revenue because of the recession, which has forced 48 states nationwide to close $166 billion of budget gaps.

Even a partial shutdown of state services could have an acute impact on residents and state workers, especially if it dragged on for weeks. Thousands of state employees could be furloughed. Road and bridge repairs would cease. Drivers couldn’t get or renew licenses. Highway welcome centers and state parks would be shuttered just as the Fourth of July weekend approaches.

All but four states start their new fiscal year on July 1. In 22 states, not passing a budget by the beginning of the fiscal year will result in a government shutdown. Another 17 states allow for temporary spending or require a special budget session. It is unclear what happens in the remaining 11 states because they have always approved their budgets on time and do not have laws covering a budget lapse.

If forced to shut down services, Arizona won’t investigate reports of child abuse or help domestic violence victims, among other things. Pennsylvania employees would stop getting paychecks beginning July 17; the state employee credit union has offered them 60-day, no-interest loans if that occurs.

Illinois officials say they probably can get by for a few more weeks without making drastic cuts in services. Gov. Pat Quinn (D), who addressed a rare joint session of the Legislature on Tuesday, has said that unless lawmakers pass a tax increase by July 1, he will trim social service programs that help the needy.

Pennsylvania Gov. Ed Rendell (D) told reporters it could take up to two months to reach a budget agreement, with government workers staying on the job but with no pay and services affected in a few weeks. Two years ago, Rendell ordered 24,000 state employees to go home after the Legislature failed to send him a budget.

California Controller John Chiang said he would begin issuing IOUs Thursday (July 2) if the Legislature and Gov. Arnold Schwarzenegger (R) cannot agree on a budget. Payment delays would affect income and corporate tax refunds; payments to private contractors, state vendors and local governments for social services; and state operations, including daily pay for legislators.

“Unfortunately, the state’s inability to balance its checkbook will now mean short-changing taxpayers, local governments and small businesses,” Chiang said.

States that fail to balance their budgets on time deal with the problem differently.

According to a 2008 analysis by the National Conference of State Legislatures (NCSL), 11 states have provisions to pass a temporary budget to keep money flowing to agencies and employees until the legislature approves a final budget, as Illinois did for a month in 2007. This is similar to the U.S. Congress passing a continuing resolution, a frequently used stopgap measure. Another four states continue spending at the previous year's level.

NCSL said 22 states face government shutdowns if there is no approved budget or if lawmakers fail to approve a temporary spending bill.

Eleven states don’t know what would happen if the budget were not enacted, NCSL said. State law does not deal with the problem because it has never come up.

A governor’s powers during a budget breakdown are not always clear-cut, as Mississippi is discovering.

Gov. Haley Barbour (R) says he has the authority to keep government operating past July 1 if there is no budget. But Attorney General Jim Hood (D) said in a June 26 opinion the governor “has no authority to unilaterally declare an emergency and seek to keep all government offices open by executive order” because the Legislature has the sole power to appropriate state money.

Connecticut Gov. M. Jodi Rell (R) said she has prepared an executive order to keep government running without an approved budget.

Even in states that have approved budgets, July 1 is a day of reckoning because many of the budget cuts and tax and fee increases enacted by legislatures go into effect. In Nevada, for example, a record $1 billion in tax increases begin; Las Vegas now has an 8.1 percent sales tax. Twenty-five states boosted taxes this year, according to the Center on Budget and Policy Priorities, a Washington, D.C., think tank.

Hardly a week goes by without another state budget problem surfacing. On Tuesday, Kansas Gov. Mark Parkinson (D) said that since the Legislature approved a pared-down state budget earlier this year, tax revenue has fallen so sharply in May and June that another $135 million in cuts will be needed as the fiscal year begins.

Without the federal economic stimulus package, state budgets would be even more out of whack. Stimulus money has closed about 40 percent of state budget shortfalls, according to the Center on Budget and Policy Priorities.

The late-hour budget-fixing special sessions are costing taxpayers. Mississippi’s sessions cost taxpayers about $60,000 the first day and $40,000 a day after that.

Perhaps the most notorious government shutdown occurred in 1995 when President Clinton and Republican congressional leaders failed to reach agreement on the federal budget and were forced to furlough thousands of federal employees a week before Christmas. The closure had a broad impact on public health, law enforcement, parks, museums, monuments, visa and passports, veterans and federal contractors. It also caused public confidence in Congress to plummet.

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States Hit Deadline For Missing Budget
Wednesday, 01 July 2009

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