Washington, DC, USA. In yet another tough budget year, the nation's governors are generally setting a course for contracting the ambitions and role of state government.

For many states, 2011 is the most trying budget year of a fiscal crisis now in its fourth year. Revenues generally remain lower than what they used to be; widespread joblessness is putting unprecedented strains on safety-net programs like Medicaid; and all this is happening as federal stimulus money runs out. In this look at the agendas that the nation’s governors have laid out for 2011, it’s clear that ambitions have been trimmed.

Many of the 28 newly elected governors — 18 of them are Republicans — see that as a good thing. They see an opportunity to shrink costs associated with the public workforce, consolidate agencies and define a generally smaller role for state government. Whether state legislatures will go along with the governors’ agendas is another question. But an unusually high number of governors have the odds — or at least politics — on their side. In 20 states, Republican governors are working with a legislature controlled by their own party. Democrats enjoy that advantage in 11 states.

Encouraging businesses to hire workers

Governors of both parties are taking aim at stubbornly high unemployment rates with ideas for creating jobs

The most sweeping employment proposal may be the one put forward by the new Republican governor in Michigan, a state that lost more than 850,000 jobs in the past decade.

Governor Rick Snyder articulated a job-creation philosophy that focuses more on “gardening,” or building businesses that already exist in the state, rather than “hunting” for out-of-state businesses with tax breaks.

He said he wants to create a statewide network of “talent coordinators” responsible for connecting entrepreneurs, innovators, management talent and job seekers with established companies.

Snyder also said he would make good on his campaign promise to get rid of the Michigan Business Tax. That tax essentially is a 22 percent surcharge on gross receipts; Snyder would replace it with a flat 6 percent corporate income tax. Snyder has said the plan will reduce the corporate tax burden by $1.5 billion, putting that money “back in the hands of employers who will be able to invest in Michigan and hire unemployed workers.”Republican Brian Sandoval said he wanted to lower Nevada’s 14.5 percent unemployment rate — the highest in the country — by creating a $10 million “Catalyst Fund” that he says would close business deals and finance infrastructure. Meanwhile a new $10 million “Silver State Works” program would target job-seeking assistance to veterans, welfare recipients and ex-offenders. He also would set aside $3 million to help residents in rural Nevada use broadband access to start businesses or telecommute.

In New York, Democratic Governor Andrew Cuomo used his state of the state address to outline an ambitious plan that he said would make New York more business-friendly by capping spending and property taxes. He said he would “fix” the recently enacted Excelsior Tax Credit Program that gives $5,000 for each new job created, including streamlining the application process. He also would like to set up 10 regional public-private councils across the state to create jobs and compete for $200 million in funding.

Other notable jobs ideas include New Mexico Republican Susana Martinez’s pledge to encourage small businesses to hire unemployed workers by covering part of the workers’ salaries for the first six months through the unemployment fund. Nebraska’s Dave Heineman, a Republican, said he wants to offer angel investment credits and internships for college students at Nebraska companies. And Washington State Democrat Chris Gregoire pledged to reduce by 48 percent the amount businesses pay to fund unemployment insurance and cut the workers’ compensation rate.

Tax cuts despite deficits

According to a Stateline tally, at least 20 governors — 16 Republicans and four Democrats — have refused to raise taxes this year. They represent about half of the U.S. population. Now, some of them are pressing forward on plans to cut taxes at a time when revenues are just beginning to improve.

Proposals come from both parties and all parts of the country. Alaska Governor Sean Parnell, a Republican, wants to lower taxes on oil. Arkansas’ Mike Beebe, a Democrat, wants to cut the grocery tax. Terry Branstad, a Republican from Iowa, wants to cut the small business tax. Maine’s Paul LePage, a Republican, wants to cut income taxes. Democrat Brian Schweitzer of Montana wants to cut taxes on homeowners. Republican Chris Christie of New Jersey and Democrat Andrew Cuomo of New York are planning to cut or cap property taxes. Democrat Bev Perdue of North Carolina called for cutting the state corporate tax. And perhaps the biggest proposed tax cut of all comes from Florida, where Governor Rick Scott is facing a nearly $4 billion deficit but still proposes to cut taxes by $2 billion, including by chopping the corporate income tax rate by 45 percent before eventually phasing it out altogether.

Of course, whether any of these proposals get anywhere is another story. Economists are deeply skeptical about the wisdom of cutting taxes now, and this feeling is palpable in many of the states that are discussing it now. Beebe, for example, noted that Arkansas could afford to cut the grocery tax by only half a percent.

Scott’s plan in Florida is being resisted by members of his own party. And Branstad’s plan in Iowa may not go anywhere in the state Senate, which is controlled by the opposite party.

There are some exceptions to the no-tax hike theme. California Governor Jerry Brown wants to raise taxes, but only if voters agree to it. Connecticut Governor Dan Malloy is pushing one of the biggest tax-hike packages in state history, affecting everything from alcohol to income. And Minnesota Governor Mark Dayton is planning to raise the state income tax rate to 13 percent for the wealthiest residents—the highest top rate in the nation.

Don’t say climate change

A New Third Rail

In 2011, governors are still among the biggest champions of alternative energy. But they’re no longer talking about it in the context of what states can do to stop global warming, as was common only a few years ago.Only Vermont’s Peter Shumlin, a Democrat, has mentioned “climate change” in a state of the state speech this year. Deval Patrick of Massachussetts and Martin O’Malley of Maryland, also Demcorats, referenced greenhouse gases. But when Matt Mead, Wyoming’s new Republican governor, mentioned global warming, it was to declare his skepticism of its man-made origins.

Instead, governors are talking mostly about improving the economy and creating jobs when they talk about energy. For example, both Mead and Republican Haley Barbour of Mississippi touted carbon sequestration — without mentioning that the purpose of sequestering carbon is to prevent greenhouse gas emissions from entering the atmosphere. Alaska Governor Sean Parnell, a Republican, set a goal for his state to get 50 percent of its power from renewable sources by 2025.

Missouri’s Jay Nixon, a Democrat, called for the construction of a new nuclear power reactor. Both O’Malley and Virginia’s Bob McDonnell, a Republican, touted the possibilities of offshore wind power. New York’s Andrew Cuomo, a Democrat, proposed a $100 million competitive grant program for companies that create green jobs.

Despite the caution, governors did make some provocative statements on environmental issues — mostly aimed at an Obama administration that they view as too aggressive on regulation. Utah Governor Gary Herbert condemned the federal government’s reassertion of its power to designate “wild lands” as an affront to state sovereignty — a theme that has been echoed recently by other Western Republicans including Mead, Parnell and Idaho’s Butch Otter. West Virginia’s Earl Tomblin also pledged to continue a suit against the EPA to stop it from rejecting coal mining permits. And Republican Governor Paul LePage of Maine has proposed adopting federal air and water pollution standards, to replace Maine’s more stringent standards.

Streamlining government

Governors of both parties have launched wars on red tape. In Florida, one of Governor Rick Scott’s first moves after his inauguration was to issue an executive order halting all new rules, including those currently in the pipeline. The Republican quickly learned that he had to make some exceptions, in order to keep the state lottery functioning, for example. In Wisconsin, Republican Scott Walker wants the power to sign off on new rules. Agencies also would have to conduct economic impact statements, among other hoops, to create new rules.

In a similar vein, Democrat John Hickenlooper of Colorado wants to require regulatory impact statements to estimate the cost to businesses of proposed regulations. Governors also are establishing a number of task forces and offices to cut back on red tape, including a Mandate Relief Task Force in New York and a new “Office of the Repealer” in Kansas.

Consolidating and reorganizing agencies also is on the agenda. New York’s Andrew Cuomo, a Democrat, would like to shrink the number of agencies and departments by 20 percent. Republican Brian Sandoval of Nevada and Democrat Governor Chris Gregoire of Washington State also want to chop the number of state agencies.

Some consolidation plans reach down to the local government level. Republican Rick Snyder has tasked an advisory panel with looking at opportunities for consolidating local law enforcement agencies in Michigan. Republican Mitch Daniels of Indiana used his state of the state address to revive his controversial proposal from last year to eliminate the state’s 1,008 townships.

State workforce cuts

2011 is looking like a contentious year for public employee unions. Republican Governors Scott Walker of Wisconsin and John Kasich of Ohio both are fast-tracking proposals that would eliminate or hamstring collective bargaining rights for most state employees. Both are proving to be controversial. Walker says he is preparing for the possibility of strikes by state workers and would not hesitate to order the National Guard in the event of labor unrest.

Many governors are looking at scaling back retirement benefits or increasing the amount that employees contribute to covering the cost of both their pensions and retiree health care. New Jersey Republican Chris Christie remains the face of this movement, but Walker is being aggressive here, too: he wants state, local and school employees to pay half the costs of their pensions and at least 12.6 percent of their health care costs — a change that he says will save the state $300 million over the next two years. Some pension proposals, including those in California, Arizona, Illinois and New Jersey, would affect current workers in addition to new hires (whose benefits are easier to change).

Governors of both parties have made dramatic proposals to reduce the size and cost of state workforces. California’s Jerry Brown, a Democrat, wants to cut the pay of state workers by 10 percent. Democrat Andrew Cuomo of New York has threatened to fire close to 10,000 workers if unions don’t agree to concessions that would reduce labor costs. And Iowa’s Terry Branstad, a Republican, wants to begin incorporating private-sector salary data into salary decisions for state workers, as well as allowing for union workers to be dismissed when government functions are privatized.

Education reform drive continues

Many states are preparing for the possibility of once-unthinkable cuts to K-12 education this year. But that hasn’t stopped a push for classroom reforms that got a boost last year from the federal Race to the Top grant program. Republican governors in Idaho (C.L. “Butch Otter), Indiana (Mitch Daniels), Nevada (Brian Sandoval) and New Jersey (Chris Christie) are looking to do away with teacher tenure provisions and want to tie teacher salaries to performance.

Daniels has been particularly vocal on the issue, pledging to take on the Indiana State Teachers’ Association, a group with which he sparred last year over Indiana’s Race to the Top application. In Wisconsin, where Republican Governor Scott Walker enjoys GOP majorities in both legislative houses, the union representing the state’s teachers has decided to endorse the pay-for-performance model in an attempt to help craft it.

School choice is back on the agenda. New Jersey’s Christie and Republican Haley Barbour of Mississippi want to create more charter schools — another idea that has found favor with the Obama administration. Sandoval, Walker, Daniels and Republican Rick Scott of Florida all have talked about creating or expanding voucher programs, although Scott has dropped his plan in light of legal questions.

In a number of states, higher education is in for big cuts, as well as administrative changes. Nevada’s Sandoval would cut $162 million from higher education. Jerry Brown of California is defending a plan that would cut $1.4 billion from state colleges and universities. Arkansas’ Mike Beebe, a Democrat, and Texas’ Rick Perry, a Republican, are pitching incentive programs that would send more money to colleges and universities that meet certain benchmarks such as a higher graduation rate. This kind of incentive funding is gaining steam in statehouses. Republican Governor Bobby Jindal of Louisiana signed a similar measure last year and now wants to expand on that program.

Saving money on corrections

Governors are speaking in new ways about their criminal justice systems

Rather than striving to be “tough on crime,” Governors are now talking about being “smart on crime,” and this is true regardless of their party affiliation.

Being “smart on crime” generally means that states are trying to save their costly prison beds for serious offenders, while punishing lesser offenders in the community — in halfway houses or on probation or parole, for example — at a fraction of the cost.Arkansas Governor Mike Beebe, a Democrat, and Indiana Governor Mitch Daniels, a Republican, are among the governors for whom this kind of transformation is a top priority. Beebe told lawmakers in his State of the State speech that, “We must appropriately punish lawbreakers, but, in some instances, non-violent offenders can repay that debt to society while remaining productive for their families and their communities.”

Probably the biggest and most controversial prison-related proposal from any governor is in California, where Democrat Jerry Brown wants to house tens of thousands of state prisoners at county jails instead. This is part of the governor’s broader plan to shrink state government and transfer responsibilities to localities, which he thinks are better-equipped to handle certain functions. The obvious problem, however, is that many local jails in California are themselves overcrowded.

State parole boards have made a surprising appearance on the agenda in several states this year. Democratic Governor Jack Markell of Delaware and Republican Sam Brownback of Kansas want to abolish their parole boards to save money, while Democrat John Lynch of New Hampshire wants to give his parole board more power. Meanwhile, in Massachusetts, Democrat Deval Patrick is overhauling the parole board after a career criminal released on parole allegedly allegedly killed a police officer in December.

Also in the criminal justice arena, New Mexico Governor Susana Martinez, a Republican, wants to reinstate the death penalty. That plan represents a deviation from a recent trend of states abolishing it. And in Alaska, Republican Governor Sean Parenell, noting that his state leads all others in cases of domestic violence and sexual abuse, called for a crackdown on child pornography and on what he called “graphic texting.”

Transportation falls off the radar

When it comes to transportation, what is most striking about governors’ state of the state speeches for 2011 is what they didn’t say

Only a dozen governors included prominent plans to improve their state’s transportation network or other major infrastructure. That is a big drop-off from just two years ago.

According to the National Governors Association, 34 governors mentioned transportation or infrastructure in their 2009 speeches. The previous year, three in four governors highlighted the area.

So it figures that the governors who did choose to mention transportation usually did so in order to highlight major new initiatives.Michigan Governor Rick Snyder, a Republican, unveiled a novel plan that could essentially give the state a free toll bridge between Detroit and Canada — alleviating a major bottleneck — using a public-private partnership. Not only that, but the state would be able to collect federal matching funds for the $550 million that the Canadian government would pay on behalf of the state.

Another rookie Republican, Brian Sandoval of Nevada, called for high-speed rail between Las Vegas and Los Angeles — something other GOP governors have panned — as well as improved highways between Las Vegas and Phoenix. The new Democratic governor of Vermont, Peter Shumlin, said while other governors rejected federal high-speed rail money (notably in Ohio and Wisconsin), he wanted to build bring fast rail service between New York City and Quebec.

One ambitious proposal is already close to fruition. Virginia’s Republican governor, Bob McDonnell, pitched a $4 billion transportation package to alleviate congestion in the Washington, D.C. suburbs and the Hampton Roads metro area. “This would be an immediate infusion of funds the likes of which the Commonwealth hasn’t seen in decades,” he said. Virginia lawmakers are close to passing a package that gives McDonnell most of what he asked for and a major political victory.

McDonnell championed the idea of an infrastructure bank, basically a revolving fund that would pay for improvements — an idea that President Obama has called for at the national level. New Hampshire Governor John Lynch, a Democrat, also touted an infrastructure bank, while Georgia Republican Nathan Deal said he wants to loosen restrictions on his state’s infrastructure bank.

Cutting Medicaid costs

As Republican efforts to get the federal health care law thrown out in court continue, governors of both parties this year have been wrestling with a challenge they all share: how to cut ballooning Medicaid costs, just as federal stimulus aid runs dry.

They don’t have many options. The new health care law bars them from adopting stiffer eligibility rules for Medicaid, so cutting enrollment isn’t an option in most cases.

Arizona’s Republican Governor Jan Brewer just got approval from the federal government to discontinue a special Medicaid program that covers some 250,000 childless adults. U.S. Health and Human Services Secretary Kathleen Sebelius said the Arizona program comes up for federal reauthorization in September, and the governor can simply choose not to renew it — without violating the new health care law’s enrollment restrictions.

But that won’t necessarily spell relief for other Republican governors who sent Sebelius a letter this month seeking a blanket reversal of the enrollment restriction. So most of the ideas governors are discussing involve making cuts in benefits and doctors’ fees. For example, South Carolina is cutting hospice care and requiring nearly all Medicaid recipients to move to cost-cutting managed care programs. Colorado, Arkansas, Vermont and other states are increasing so-called provider fees paid by hospitals to raise matching funds for federal Medicaid dollars. Massachusetts will no longer pay for dentures. North Carolina has stopped covering surgery for the clinically obese.

Other notable big health care ideas:

• Vermont’s new Democratic Governor, Peter Shumlin, wants to create a single-payer system in his state, an idea that proved too liberal for Democrats in Congress when they passed federal health care reform. Shumlin says the plan could save Vermonters as much as $500 million in the first year.
  
  
• In Massachusetts, Democratic Governor Deval Patrick is pushing to remove a cloak of secrecy around contracts between doctors and hospitals and insurance companies. His idea is to make that deals between these health care players public in hopes that transparency will drive down costs.
  
  
• New York’s Governor Andrew Cuomo, a Democrat, established a blue-ribbon “Medicaid redesign” team charged with re-inventing New York’s Medicaid program to dramatically lower costs. The project, which has an April 1 deadline, is patterned after a similar revamp in Wisconsin; former Wisconsin Medicaid director Jason Helgerson is heading it up.

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