Pennsylvania has money to spare

By ALEX CUKAN, United Press International  |  Jan. 3, 2003 at 3:31 PM
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ALBANY, N.Y., Jan. 3 (UPI) -- When state legislatures convene in January, most will be looking for money to balance their budgets and when they're done with that they'll try to raise taxes that don't look like taxes. But Pennsylvania is one of the few exceptions.

Of the Atlantic states of New York, New Jersey, Pennsylvania, Delaware, West Virginia and Maryland only Pennsylvania is facing the next 18 months without a deficit.

"We're leaving a balanced budget and a quarter billion remaining in the rainy day fund. We're proud of the record," David La Torre, Pennsylvania Gov. Mark Schweiker's spokesman, told United Press International. "It took fiscal discipline to save $1.1 billion in the rainy day fund out of a $20 billion yearly state budget."

Gov. Tom Ridge, a Republican picked last year to run Homeland Security for the Bush administration, as well as Schweiker, Ridge's successor, faced "a lot of heat for building the rainy day fund and then not spending all of it," according to La Torre.

"In the late 1990s when other states were spending record surpluses, Gov. Ridge chose to build the rainy day fund. We used $700 million of the fund to address the $1.3 billion deficit last year, and we'll be leaving the next governor $50 million in the rainy day fund," La Torre said. "State agencies had to cut their budgets 2 percent but we have not raised taxes."

Maryland Gov.-elect Robert L. Ehrlich Jr., a Republican, is facing a $550 million deficit for fiscal year 2003 and $1 billion for the next fiscal year -- from a $21 billion budget. But outgoing Gov. Parris N. Glendening, a Democrat, has proposed a raise for state workers costing $100 million.

"Gov. Glendening is proposing the raise to state workers because they work hard and the raise is deserved, the last raise was in fiscal year 2002 and was for 2 percent," said Raquel Guillory, a spokeswoman for Glendening. "However, the Legislature can vote the raise down or reduce it -- it has in the past."

Ehrlich is considering consolidating state agencies, legalizing slot machines to raise an estimated $400 million and selling state land or buildings. But he does not want to raise taxes or lay off workers.

Government workers have already been laid off in New York, which is facing about a $12 billion deficit in the next 18 months.

New York City lost more than 43,000 jobs in 2002 as a result of the terrorist attacks on the World Trade Center and the downturn in the economy. Unemployment climbed to 8 percent in December in New York City alone.

The financial sector, with its high salaries, bonuses and corporate profits, fuels New York's economy as well as the country's. The brokerage sector in Manhattan has laid off roughly 78,000 people since mid-2001, according to Fortune magazine.

The city is facing a deficit of about $4 to $5 billion in the upcoming 18 months and New York City Mayor Michael Bloomberg has ordered all city departments to cut their budgets by about 6 percent. For the New York Police Department that means laying off 1,900 officers. The mayor has also raised fees and wants an 18.5 percent property tax increase.

Bloomberg wants to save $500 million through attrition and early retirement that would cut 5,000 jobs from the city's 250,000-member workforce. He also wants $800 million from the state, but the state may have to cut its workforce as well.

"I'm not ruling out anything, and that includes layoffs, deferring tax cuts, tax hikes or using tobacco money," New York Gov. George Pataki said. "Very simply, we face enormous challenges."

Pataki, a Republican, has proposed selling bonds backed by the state's share of the 1998 tobacco settlement that could bring in $4 billion, but Assembly Speaker Sheldon Silver, a Democrat, has refused.

"The speaker said he wanted to see the proposal in the context of the whole budget," Elaine Larrabee, Silver's spokeswoman, said. "He doesn't want to jeopardize the current uses of the tobacco money -- anti-smoking programs, health care for children and families, some funding of the state prescription drug program and aid to rural hospitals."

Also, New York has long been known as having the Cadillac of Medicaid programs, the joint federal-state effort to provide healthcare to the disabled and poor in which states pay 40 percent of the bill. According to the Centers for Medicare and Medicaid, the state spent $9,474 per Medicaid recipient in 1998 -- nearly twice the national average.

Under former Gov. Mario Cuomo, Medicaid spending increased 21 percent annually but Pataki has slowed that to an average 2.3 percent. Nonetheless, the state spends $8.2 billion a year on Medicaid from its $89.6 annual budget.

Dennis Rivera, the president of the hospital workers' union 1199/SEIU, fought Pataki hard on Medicaid cuts when Pataki took office in 1995. But since then, they have joined forces in expanding Medicaid to provide health insurance to children and the working poor as well as give raises for health care workers.

How Pataki will pay for the recent Medicaid worker's raise is still a mystery, but Rivera did back Pataki in his successful bid for a third term as governor.

While state and city coffers bulged with income and business taxes during the late 1990s, New York City appeared to have a surplus, but it was partly obtained by borrowing from the next year's revenues. The state had more than $3 billion in its rainy day fund, but that was used to help bridge the budget gap this year.

Upstate cities have been struggling for the last 20 years as a result of the loss of tens of thousands of manufacturing jobs, a loss in population, shrinking property values and a diminishing property tax base. For years, all of the cities looked to Albany to balance their annual budgets to the tune more than $400 million a year.

Schenectady's credit rating recently dropped to junk-bond status, an expensive designation shared by Niagara Falls, Troy and Utica.

With no more help from the state, the cities have been cutting budgets, laying off workers and approving property taxes increases from 6.6 percent to 14.2 percent. In addition, the state comptroller has warned the cities to budget an additional 3.8 percent of their payroll costs to cover the employee pension plan after years of paying less than 1 percent.

Buffalo had closed a $31 million gap this year by cuts to firefighters, police and education but it faces another $27 billion shortfall next year.

New Jersey's unemployment rate is at its highest level in six years at 5.6 percent with telecommunications, high-tech businesses and pharmaceuticals particularly hard hit.

This year, New Jersey Gov. James E. McGreevey, a Democrat, closed a $6 billion revenue shortfall of the state's $23 budget by cutting spending, raising fees, using tobacco money and raising corporate taxes by $1 billion.

McGreevey, pleased he didn't raise sales or income taxes, is close-mouthed about how he plans to deal with the $4 billion deficit in the next fiscal year, but he has said it's unlikely businesses would see another tax hike.

Delaware, home of numerous corporations, has a budget of a $2.3 billion and faces a budget deficit of $91 million for the current fiscal year and another $135 million for fiscal 2004. Gov. Ruth Ann Minner, a Democrat, wants state agencies to cut their budgets again after cutting the state budget $200 million this year.

"Times have been tough in Delaware because of the recession, but we have not had to raise taxes, drastically cut services, lay off workers or raid emergency funds like other states," Minner said.

Corporate-franchise taxes, based on the value of a company's stock and assets accounts for about a quarter of the state's revenue, have been down 20 percent.

According to Minner, the spending cuts get harder as time goes on because the easy cuts came first.

West Virginia's Gov. Bob Wise, a Democrat, got a Christmas gift of $11.1 million as a result of his state's share of taxes in the $314.9 million multi-state Powerball lottery awarded to Andrew Whittaker Jr.

The windfall will help Wise close the $30 million budget gap in the state's $3 billion budget.

To make up the rest of the budget difference, Wise is open to suggestions.

On his Web site he urges the public and state workers to "submit ideas and suggestions to make state government better and more efficient to help solve the budget crisis."

West Virginia, which is making about $317 million a year from its video slots machines at race tracks, has lawmakers concerned they may lose up to 40 percent of its gambling revenue if neighboring states institute competing "racinos."

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