More States Look to Revenue Increases as Budget Woes Persist

Facing another round of deep cuts to health care and education as a result of ongoing revenue shortages caused by the slow economic recovery, and on the heels of a new national survey reporting that most state budgets have now seen spending fall below pre-recession levels, some states are signaling that they will be pursuing more balanced approaches to their budget troubles in 2012 than they have in previous years.

In Washington, Governor Christine Gregoire is advocating for a temporary sales tax increase to help protect from further cuts. The legislature, which convened for an emergency special session this week to address the budget amid protests from residents opposed to further cuts, would likely send a package to voters for an up or down vote this spring. A recent poll found that roughly two-thirds of voters supported the idea of the temporary sales tax bump if it meant preserving education funding and preventing other service cuts. Even major business interests are acknowledging the need for increased state revenue in this special session. “At the end of the day, I think we recognize that things like higher education, public health and public safety are on the line,” Don Brunell, president of the Association of Washington Business, told The Olympian newspaper in a recent interview.

More and more states are also indicating that revenue will be front and center in 2012 legislative sessions as they seek to rebuild prosperity after suffering from historic revenue shortfalls. In Maryland, Governor Martin O’Malley is set to embark on an ambitious legislative agenda that includes raising new revenue to close the state’s most recent deficit. One proposal he is asking the legislature to consider is an increase to the gas tax, which would phase in over three years and would go toward paying for stalled transportation and infrastructure projects to boost local job creation. California Governor Jerry Brown is also preparing to announce a tax plan in the near future that would be put to voters in a ballot initiative in November 2012. According to the Los Angeles Times, Gov. Brown’s proposal would aim to close a likely $3.7 billion shortfall by raising tax rates on upper-income earners and increasing the state sales tax by half a cent, and would sunset in 2016.

In other states, governors and lawmakers are reconsidering anti-tax pledges amidst severe budget pressures. In New York, where the growing Occupy movement has intensified debate over an expiring Millionaires’ Tax, some have asserted that Governor Andrew Cuomo might not be able to count on Republicans in the Senate to allow the tax to expire. With significant cuts looming, there is speculation that some lawmakers, particularly in districts with fewer wealthy individuals, would prefer to extend the tax rather than find savings elsewhere. Perhaps in response to this pressure, reports have indicated that Gov. Cuomo — who had been dubbed “Governor 1%” by some in the Occupy movement — is now considering proposed changes to the state tax code for next year that may include asking the wealthy to pay their fair share.

Some states have already been pursuing a more balanced approach in dealing with their budget troubles. Connecticut used new revenue to cover roughly two-thirds of the budget hole last year, including a restructuring of the state income tax. Connecticut lawmakers also created a state version of the earned-income tax credit to help working families weather the difficult economic conditions. As a new report released by the National Governors Association and the National Association of State Budget Officers released this week notes that state budgets will continue to face significant shortfalls in 2012, proposals to increase revenue look as if they will be on the table in many states next year.

Full Resources from this Article

More States Look to Revenue Increases as Budget Woes Persist


National Governors Association and the National Association of State Budget Officers — Fiscal Survey of States Fall 2011
Bloomberg News — Cuomo Considers Changing N.Y. Tax Code as Economy Struggles
Connecticut Mirror — Against the tide, Connecticut helps the working poor
Los Angeles Times — Jerry Brown to pitch tax plan to voters

This article is part of PSN's email newsletter, The Stateside Dispatch.
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