States facing higher taxes and cuts in services

The old carnival shell game has, in recent years, become increasingly the modus operandi of the Congress and the administration.

How wondrous the benefits that have been promised the citizenry via this or that program, this or that legislation.

But like the shell game, much of it has been now you see it, now you don't. The Capitol Hill folks too often have neglected one key component of their largesse: money to pay for the programs enacted.

Thus the rise of “unfunded mandates” — programs that the states are directed to carry out, but which the federal government doesn't fund, or grossly under-funds. Examples abound, education and homeland security being a couple of the more noteworthy.

With a national economy that's on life support, millions of people out of work, and the business sector in what seems a chronic funk, state tax revenues have been evaporating like a snowball in August. There isn't a single state that isn't coping with a budget crisis.

The National Governors Association projects that states will lack $50 billion this year to meet their fiscal needs and that next year the shortage likely will hit $70 billion.

Unlike the federal government, which can pile up deficits ad infinitum, most state legislatures are required to submit a balanced budget. To do so in the face of sharply reduced revenues has forced them to make significant cuts in services. Along with health care and other key programs, Extension, ag research, and other agriculture-related programs have been at bare bones levels for a long time and the prospects aren't bright for any improvement.

In my state of Mississippi, legislators have been scrambling to try and find ways to offset major revenue declines, particularly the big drop from the gambling casinos that were for several years the goose that laid the golden egg. Several possibilities are being explored, including a 50-cent per pack increase in the cigarette tax, which would bring in an estimated $128 million. But that, and other tax increase proposals, are pretty much dead in the water since this is an election year and no state legislator's going to risk voter ire by raising taxes.

While states are being forced to cut vital services at every level and many are facing their worst budget crises since World War II, President Bush, in his State of the Union address, continued pushing for tax cuts as the chief component of his economic stimulus package. On the one hand, the federal government will be giving us tax breaks it can ill afford in the face of a $400-billion-and-climbing deficit; on the other, states will be forced to raise taxes to maintain subsistence level services — including those federally-mandated programs that came with no money attached.

Even if war with Iraq never happens, the costs associated with the military buildup and ongoing security efforts will be vast and a drain on the economy for years. With Uncle Sam's coffers increasingly depleted, there isn't much hope that states can expect much federal assistance with their financial crises.

Shell games. It ain't gonna be pretty.

e-mail: [email protected].

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