Happiness was in short supply at the recent National Governors' Association conference in Seattle. The last year has been filled with ever-widening budget deficits, painful layoffs, tax increases and a growing clamor for social services as the nation's recession hit home. But the next 12 months could be just as bleak.
With Washington's pullback on domestic spending, state governments have had to take up the slack. That means more expenses but no new money to pay for the extra services. At the same time, Congress has imposed mandates on the states to provide more programs -- but it has imperiously ignored the extra billions in costs this entails. What's a governor to do?
Some chief executives are calling for a vast restructuring of state government. They want to adopt management techniques and quality-control procedures businesses are using to cut costs and improve efficiencies. What better time to try new ways of delivering services than during a recession when cutbacks could imperil entire programs unless alternatives are considered?
Other governors, such as Maryland's William Donald Schaefer, want to save money and give poor people better health services by requiring preventive medical exams of Medicaid and welfare recipients. The payoff could be substantial, both for the state's treasury and for the tens of thousands of poor people who would avert major medical problems through early detection and treatment.
Such steps will help, but long-term trends are driving up costs. The school-age population is rising, creating new demands for child-care programs, more education dollars and extra help for kids in poverty. At the same time, the nation's elderly population is growing, which translates into additional costly social programs.
These trends won't dissipate. With Washington unwilling to help out, and the recession showing no sign of relenting, the governors have little recourse but to ask citizens to bear a heavier tax burden. Some executives already have bitten the bullet and pushed through major tax hikes this year; others, such as Governor Schaefer, face that unappetizing prospect next year.
As long as the recession lingers, times will be traumatic for the states. But the governors who have the creativity and political moxie to streamline state services and progressively revamp taxes will be in an enviable position when economic indicators point upward once again.