Hard-pressed states seek higher taxes

April 18, 1991|By Paul West | Paul West,Washington Bureau of The Sun

WASHINGTON -- Despite anti-tax sentiment at the ballot box last fall, at least 24 states are proposing higher taxes to help balance their 1992 budgets.

A national survey released yesterday found that most governors and legislators, forced to confront the most severe state fiscal crunch since the 1982-1983 recession, are resorting to a mixture of revenue increases and spending cuts to make ends meet.

The report paints a grim picture of the financial condition of the states and warns that even if the economy turns around later this year, state governments will be slow to recover.

"State fiscal conditions are the worst in nearly a decade," said the report by the National Governors' Association and the National Association of State Budget Officers.

"States entered this recession in a weaker position than they entered the recession of the early 1980s," the report added. "As a result, a prolonged recession could batter state budgets very badly."

Voter anger over higher taxes helped unseat governors in six states last November and persuade governors in 10 other states to retire rather than risk re-election.

One of the key questions in the states this year was whether elected officials would steer clear of higher taxes as they struggled to balance the budgets as required by law in most states. With budget action unfinished in many state capitals, the answer to that question is "still uncertain," the report concludes.

In a growing number of states, including Maryland, governors and legislators who had vowed to keep tax increases off the table are resorting to higher taxes or fees on everything from snack foods, cigarettes and newspapers to car registrations.

"I think that there is going to be a lot more tax activity coming out of legislative sessions than there was going in," said Marcia A. Howard, acting director of the state budget officers association and the author of the report.

The downturn has already sharply cut expected state taxes, forcing 29 states to reduce spending by a total of $8 billion to balance their 1991 budgets. In 23 states, governors are proposing higher taxes for 1992; in at least one other, Maryland, the legislature enacted a tax increase that was not specifically called for by the governor.

Along with the industrial Midwest, states in New England and the mid-Atlantic region remain the most hard pressed, the survey found. In dollar terms, California, the nation's most populous state, faces the most severe problem, a $12 billion budget shortfall over the next two years.

Nationally, state spending showed virtually no increase in budget year 1991 and will, at best, remain flat in 1992.

Eight states, mainly in the East and Midwest, have already proposed lower budgets for next year. And if the national economy fails to improve by midyear, there is a good chance that state government spending will decline nationally for the first time since 1983, according to Ms. Howard.

"The current problem is obviously 90 percent driven by the recession. It's the falloff in revenues which has caused this problem," said Raymond C. Scheppach, executive director of the governors' association. A shift of responsibilities from the federal government to the state level, particularly for health care, has also contributed to the problem, he added.

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