For many states, 2008 will be remembered for record numbers of home foreclosures, $4-a-gallon gasoline and the beginning of a slide into new fiscal trouble after two years of overflowing coffers.
Stateline.org’s annual state-by-state look at legislative accomplishments cites, among other issues, a looming shortfall in states’ main source of highway funding and predictions of even worse financial woes ahead.
Pennsylvania Gov. Ed Rendell (D) solicited a whopping $12.8 billion bid from a private company to lease the state’s turnpike for 75 years, a proposal still under debate.
Wisconsin Gov. Jim Doyle (D) used money from the state’s road fund—again—to pay for day-to-day operations.
While tax increases are usually a last resort for lawmakers, especially in an election year, Minnesota legislators overrode a veto by Gov. Tim Pawlenty (R) to hike the state’s gasoline tax by 8.5 cents a gallon to raise road and bridge funds in the wake of last year’s deadly Minneapolis bridge collapse.
For fiscal 2009, which began July 1 for all but four states, lawmakers in 23 states had to address $26 billion in shortfalls as they put together their new budgets, the National Conference of State Legislatures (NCSL) reported in April. This summer’s floods in the Midwest, particularly along the Mississippi River, could wreak havoc with the economies of Illinois, Indiana, Iowa, Minnesota and Missouri.
Unlike the recession of 2001, not all states are feeling the economic pain. About a dozen oil-, gas- or grain-producing states are benefiting from high energy and commodity prices. So, while Rhode Island had to close a $422 million shortfall, North Dakota has a $740 million surplus largely because of its oil and agriculture production. New Jersey just slashed $2.9 billion in spending to balance its 2009 budget, but Texas could have a $10.7 billion surplus for its next two-year budget when the Legislature convenes in January because of a 58% increase in oil-production tax revenues.
With gas prices reaching unprecedented levels, lawmakers tried to ease constituents’ pain at the pump. The Connecticut General Assembly blocked a scheduled increase in the state gasoline tax. Georgia Gov. Sonny Perdue (R) used his executive powers to do the same in his state.
But bids to lower state gasoline taxes, which add 8 cents to 45.5 cents per gallon, failed. The revenue usually pays for road construction, which is itself more expensive because of higher fuel costs. Adding to the limited maneuvering room, the federal Highway Trust Fund—a main source of state road construction money fed by the federal gas tax of 18.4 cents per gallon—is expected to fall $3 billion short this year, meaning a 34% reduction of payments to states unless Congress finds more money.
