Grappling With Budget Deficits, Nation's Governors Sit Down With President Obama


"The times call out for vision and for discipline," the Democrat said in his state of the state address last month. "Discipline so that we live within the revenue which the state collects each year, and vision so that we rise above mere party, act as Californians first, and put our trust in the people."

Brown also ordered government agencies to stop purchasing new cars and to get rid of ones that are not "essential" to state business. He has asked state workers to give up 48,000 cell phones, a move that could save the state $20 million.

In New York, Democratic Gov. Andrew Cuomo called his state "functionally bankrupt" and called for cuts to education and Medicaid to close a $10 billion budget deficit.

In Florida, Republican Rick Scott rode the support of the Tea Party movement to victory in last November's gubernatorial race. He's now under pressure to make good on his pledges to close the budget gap and cut taxes.

In the budget outline he released earlier this month, Scott proposed cutting state spending by $5 billion, with more than $3 billion cut from education spending. Scott also called for a rollback of corporate income taxes and a reduction in property taxes, adding up to more than $4 billion in tax cuts over two years.

Arizona Gov. Jan Brewer has taken the unusual step of asking the federal government for a waiver so the state can remove nearly 300,000 adults from its Medicaid rolls.

Obama's Recovery Act, which went into effect in February 2009, gave nearly $150 billion in assistance to cash-strapped states over two years. But that money is set to run out in June.

Cuomo compared the federal stimulus dollars to an addictive substance. "We inhaled it and injected it into our body," Cuomo said. "And now it is gone."

The combination of still weak tax revenues and the federal stimulus money running out are creating the budget headaches for governors and state legislatures. State tax revenues are gradually recovering from the economic crisis but most economists and policy experts say they will not fully recover until the nation's employment stabilizes, which could take years.

"At at time when states' own tax revenues are still very depressed, running about 12 percent below pre-recession levels, on top of that states now have to fill in for the funds that have gone away because the federal funds are running out," Johnson said.

Tad DeHaven, a budget analyst for the libertarian Cato Institute, said states get themselves into budget trouble by failing to prepare for rainy days.

"When times are good, the economy is good and when revenues are coming in, they spend it," DeHaven said. "They make promises to the work force that can prove costly in the long term and inevitably we have a downturn, revenues dry up and they plead poverty. But the problem is they don't implement the structural reforms necessary to smooth things out."

DeHaven said "Uncle Sam" ends up filling that void.

"In the long term there's a lot of questions about the federal government's ability to keep doing this, given its own financial problems," he said.

There are also questions from Democrats about whether the bailout money allowed states to keep workers and services and from Repbulicans about whether it just let the states put off making the cuts needed to get their budgets in order.

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