Budget Nightmare: 10 Most Broke States

Residents seeking to get a new driver's license or even call with questions about their IOUs might find their pleas falling on deaf ears. Governor Arnold Schwarzenegger is shutting down most of state government for three "Furlough Fridays."

Voters in May rejected five ballot measures that would have helped stop the budget crisis. Now, to raise cash, Schwarzenegger has called for selling off certain state properties.

He also proposed eliminating $70 million of funding for state parks, which would likely result in the closure of 220 parks. The legislature is trying to avoid those closures through a $15 increase in annual motor vehicle registration fees. California drivers would then get free admission to the parks.

To help close the gap, the state has also increased co-payments and reduced dental benefits in its children's health program. Other big cuts include state aid to local school districts, a 10,000-student enrollment cut at the California State University system and the elimination of dental and vision services for many Medicaid recipients.

Other Troubled States

Arizona: $4 billion shortfall or 41 percent of its budget

Arizona was ground zero for the collapse of the housing market. Cities like Phoenix have seen home prices plunge while jobs have dried up. Income tax collections are down 34.4 percent and the sales tax is down as sakes of building supplies and other consumer goods plunge.

The governor and legislature have been battling over way to close the budget gap. At issue: more than $630 million in spending cuts, including the elimination of a welfare program for disabled people waiting for Social Security benefits.

Gov. Jan Brewer wants to temporary hike the state's sales tax from 5.6 percent to 6.6 percent. For each of the three years she expects it will take to turn around the state's economy, the hike would bring in an extra $1 billion. But lawmakers have balked.

Instead they have reduced school spending, cut $40 million from the state universities, $49 million from the Health Services Department and taken $43 million in slot-machine revenues that were supposed to go to highways and used it for other spending.

The governor vetoed most of the $8.4 billion budget Wednesday, saying it "incorporates devastating cuts to education, public safety and our state's most vital services for the frail."

She called lawmakers into a special session Monday to pass a budget that avoids deep cuts in part by increasing the sales tax.

The government is unable to make cuts to roughly one third of the budget because voter mandates stipulate exactly how that money should be spent.

Nevada: $1.2 billion or 38 percent of its budget

Like Arizona, Nevada was hit hard by the housing market. But the state also got whacked by a drop off in tourism and gambling revenue. First, high gas prices kept tourists away. The only way to get to Las Vegas is to drive a far distance or fly. Then the recession made people less willing to gamble with their paychecks. That has put a massive strain on the state's budget.

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