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FACING FACTS: According to New Survey of Residents in Five Fiscally Challenged States, Policymakers Taking Office in 2011 to Face Huge Budget Challenges, Conflicting Advice from Taxpayers

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“Policy makers will have to make unpopular budget decisions to help their states fully recover.”

Taxpayers in five of America’s most fiscally challenged states are looking to policy leaders to weed out waste and inefficiency, prioritize spending, and close budget shortfalls now rather than passing the costs on to future generations. Those are the key findings included in Facing Facts: Public Attitudes and Fiscal Realities in Five Stressed States, a new report by the Pew Center on the States and the Public Policy Institute of California (PPIC) that is based on a public opinion survey of residents in Arizona, California, Florida, Illinois, and New York. Together, these states comprise almost one third of the nation’s population and economic output. Collectively, they accounted for 45 percent of states’ total projected budget gaps for Fiscal Year 2011.

Even though the surveyed individuals span the ideological spectrum—the report notes that Florida and Arizona tend to have conservative voting tendencies and frugal spending habits while New York and Illinois are more liberal—the report finds surprisingly similar reactions to states’ fiscal problems. In each location, a majority of respondents expect bad times in the coming year. They want to preserve funding for K–12 education—and to a lesser extent, health and human services, such as Medicaid—and a majority in each state is willing to pay more taxes if necessary. Majorities in every state overwhelmingly think their elected leaders should take action now, rather than wait until the economy improves.

At the same time, however, the report notes that residents’ attitudes are “contradictory” and their expectations are “unrealistic.” For example, it finds that hefty majorities in each state are very or somewhat concerned about the effects of state spending reductions on government services, but say spending cuts are their first choice to balance state budgets. Additionally, solid majorities think that a good portion of their state’s budget problem can be solved by reducing waste and inefficiency in government without affecting services. Residents also want to protect funding for K–12 education or Medicaid. Avoiding cuts to these programs—by far the biggest portions of state budgets—likely will not bridge states’ ongoing structural gaps between revenues and expenses. It would also mean making far deeper cuts in other areas, such as higher education, transportation, and corrections.

When it comes to revenue, most residents prefer to squeeze new revenue from someone else—smokers, drinkers, gamblers, and corporations—to ensure essential government services. However, as the report notes, increases in these revenue streams likely would not be enough to close severe budget gaps on their own. In an attempt to explain the gap between voter expectations and fiscal reality, the report questions whether residents of these states have  become accustomed to getting more services than they pay for.

“There is a disconnect between what the public wants and what is needed to resolve the states’ fiscal crisis,” said Susan Urahn, managing director of the Pew Center on the States. “Policy makers will have to make unpopular budget decisions to help their states fully recover.”

In nearly every state, unpopular budget decisions have already been made, but more will be necessary. According to the report, almost all states have slimmed down since the recession began in December 2007. In fact, all but six states operated on a smaller general fund budget last year than two years ago. Many states have used both spending cuts and tax or fee increases to close large budget gaps in the past three years. The federal government has softened the pain by providing as much as $140 billion in stimulus funds over the last two years and another $26 billion in August 2010 for education and Medicaid. But that pain relief is only temporary. As the report notes, most of the stimulus funds will run out by July 2011. And because state revenues typically lag increases in federal revenues by a few years, the report warns that even a national recovery could not boost state revenues fast enough to restore budgets to health across the country in time to avoid another year—if not several more—of cuts, new taxes, or other remedies.

Facing Facts notes that this is a tumultuous fiscal time for residents in these five states and the nation as a whole, but it is also a time of potentially huge political upheaval. According to the report, it is “almost certain” that at least half of the nation’s governors will be new in 2011, and more than 6,100 of states’ 7,500 legislative seats are up for grabs.

“This new leadership class must make good on state promises to educate, protect, and enrich the lives and livelihoods of their constituents, but with fewer dollars in 2011 than were spent on those same services at the start of the recession,” the report warns. “The arrival in 2011 of a massive new crop of first-term governors, coupled with the likelihood of a larger-than-usual number of new state legislators, could make for an unusually stressful and contentious legislative season next spring. Or—if respondents to this survey have their way—it could present an opening for genuine reform.”

The complete report is available at http://www.ppic.org/content/pubs/survey/S_1010PEWS.pdf.

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Economic Impacts

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