States to residents, localities: forget promises to restore funding

Original Reporting | By Mike Alberti |

Critics in other states argued that the legislatures should use budget surpluses to restore funding to state services that have been cut or eliminated. 

Arizona, for example, eliminated more than 300,000 people from its Medicaid roles in 2010, became the first state to eliminate its Children’s Health Insurance Program — thereby leaving nearly 47,000 low-income children without coverage — and also dramatically reduced mental health services.

“Giving money away to businesses when there are thousands of people who now have to resort to going to the emergency room because the state took their health insurance away shows you something about the priorities of our legislature.” — Arizona State Senator Steve Gallardo

Arizona will end the fiscal year with a budget surplus of at least $500 million. But state Republicans, who control both legislative houses and the governor’s office, have passed tax cuts in both of the last two legislative sessions, most of which will go into effect in 2014. In 2011, lawmakers passed a package of cuts that, among other things, will reduce the corporate income tax by a third. The total package will mean $538 million less revenue over the next ten years. This year, the state supplemented those cuts with further cuts in business taxes, and a 25 percent reduction in individual income tax on capital gains, amounting to nearly another $100 million in lost revenue.

“These cuts are coming directly at the expense of the people of this state,” said Arizona State Senator Steve Gallardo. “Giving money away to businesses when there are thousands of people who now have to resort to going to the emergency room because the state took their health insurance away shows you something about the priorities of our legislature.”

And in other states, local officials who are seeing their property tax revenue drop are asking state lawmakers for help.

In New Jersey, where state aid to local governments was slashed over the last three years, Governor Chris Christie is now proposing to cut income taxes by 10 percent, even though the state’s projected $588 million surplus is disappearing as tax collections come in under expectations.

In Maine this year, the legislature simultaneously reduced some funding for local governments and passed the largest tax cut in the state’s history. “You can’t simultaneously say we don’t have money, and then give tax breaks to people that reduce state revenues,” said Portland Mayor Michael Brennan.

These states are not alone (see bottom box on the plight of Hillsborough County, Florida).


Broken promises

When the budget cuts were enacted in 2009, 2010, and 2011, many state officials justified them by claiming that, due to the loss in state revenue, there was little choice but to reduce services, school funding, and aid to local governments.

In Oklahoma, before lawmakers voted to cut the state budget by 10 percent last year, a spokesperson for Governor Mary Fallin said, “The reality of the budget situation is that every agency is going to have to find ways to tighten its belt and save money.”  

As Florida lawmakers proposed cutting public school funding by $455 per student, State Senator David Simmons said, “No one wants to go home cutting school funding, but we’ve run out of options.”

Now that states are using surplus revenues to fund tax breaks instead of reversing those cuts, however, such promises ring hollow to many who had reservations about the cuts in the first place.

 “We heard all of this rhetoric about shared sacrifice,” said Jeff Clemens, a Democratic state representative in Florida. “And we sacrificed. Students, the poor, seniors all sacrificed. And now, when the state could give them a break, we’re giving billions of dollars to businesses that didn’t have to sacrifice at all.”

Hillsborough County, Florida: “We can’t take it anymore”

In Hillsborough County, Florida, which includes the City of Tampa, budget manager Tom Fessler said that property tax revenue has declined by 30 percent since its peak in 2007. At the same time, funding from state revenue-sharing has also declined, meaning that the county has been forced to eliminate 1600 positions and reduce a range of services, from health care to after-school programs..

“We were hoping that this would be the last year that property tax revenue would fall,” Fessler said. “Unfortunately, we’re still projecting decreases into next year.”

But no help will be forthcoming from the state government. Instead, state lawmakers enacted a package of tax cuts this year, including a cut in the corporate income tax, which will cost more than $1 billion over the next three years.

“That’s going to put pressure on their budget, and so instead of asking them to help us, the cities and counties are now just asking them not to shift services onto our backs,” Fessler said.

Next year, Fessler anticipates further cuts as revenue continues to fall. “We’ve already cut out all the fat and we’re now at the bone,” he said. “If we cut one more dollar, our residents are going to feel that.”

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