WASHINGTON — An analyst who monitors state governments said Monday that Maine’s current budget crisis is likely to linger well into the 1990s and will force unprecedented changes in local government.
“Proportionally, Maine’s deficit is one of the worst in the country,” said Gary Pearce, senior editor for the National Resource Center for State Laws and Regulations. Pearce is the author of a new report titled “State Houses Rest on Shaky Fiscal Foundations.”
According to Pearce, state governments in general are encountering monumental “structural budget deficits” that defy easy solution.
“The conclusion we drew was that things will not get better at any time. Not in 1992. Maybe not even through the 1990s, period,” he said. His report concluded that despite record tax increases and budget cutbacks last year, “state governments still have failed to remedy their long-term budget problems.”
Maine’s 1991 tax increase of $300 million — an amount equal to 17 percent of the state’s budget — proportionally trailed only Pennsylvania where a 24 percent tax increase was enacted. Yet both states, and many others that enacted huge tax increases last year, are no closer to resolving their budget problems, Pearce said.
Raymond Scheppach, executive director of the National Governors Association, summed up the problem this way in the NRCSLR analysis.
“In 1989-90, when growth began to slow, governors tried to maintain services. So they raised taxes about $10 billion. Then, because the economy didn’t respond, they had to cut $7 billion from their planned 1991 spending,” Scheppach said.
“Now, they have gone back and raised another $15 billion — the highest amount ever in a single year. Together, that represents a negative swing of $32 billion in tax hikes and service cuts in a two-year period, in total state budgets of $264 billion.”
“The striking thing about watching states grapple with budget deficits,” Pearce said, “is that when states attempt to make cuts they run into enormous pressure from public employee and teacher unions. Then they try to raise money (through higher taxes) and they encounter enormous business and taxpayer resistance.”
“There’s almost a sense of hopelessness in the state capitals,” he said. “It’s gotten to the point where (politicians) don’t have to worry about term limits. Nobody wants the job of dealing with these problems anymore,” said Pearce.
How did the states get into their current mess?
“Basically, they went through the 1980s with annual revenue increases of 10 percent or more … and expanded government services by that much every year. Now the revenue growth is less than half that level, leaving large numbers of state employees and teachers who expect to get paid,” Pearce said.
To date, most governors still have not faced up to the true dimensions of their problems. “They’ve used up all the gimmicks … and they had some job reductions. But there’ve been no massive layoffs. In no state have thousands of teachers and public employees been laid off yet,” he said.
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