The New York Times The New York Times National November 26, 2002  

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States Are Facing Big Fiscal Crises, Governors Report

(Page 2 of 2)

To deal with a fiscal crisis in Arizona, the governor-elect, Janet Napolitano, a Democrat, wants agencies to cut spending by 10 percent across the board, making exceptions only for education, corrections and some children's services.

The University of Iowa increased tuition and fees this year by 18.5 percent, the biggest increase in more than two decades, after an increase of 9.9 percent in the prior year. The state Board of Regents is considering further increases for the next academic year.

Most of the tax changes made by states in the last year affected tobacco levies. Nineteen states increased cigarette taxes, many by more than 50 cents a pack, the governors' survey said.

Services account for a growing share of state economic activity, but states have found it difficult, for political reasons, to increase taxes on services. Likewise, Mr. Scheppach said, "it's very hard to raise taxes on middle-income Americans, when they don't have secure health insurance, to pay for health care for low-income Americans."

State tax collections came in far below the states' original estimates in the most recent fiscal year, which ended on June 30 for most states. Sales tax revenues, $147.6 billion, were 3.2 percent lower than expected, while personal income tax revenues ($187.7 billion) were down 12.8 percent and corporate income tax receipts ($21.6 billion) were down 21.5 percent.

In July, the United States Senate overwhelmingly approved a proposal to provide fiscal relief to states through a temporary increase in federal grants for Medicaid and social services, but it never became law. The Bush administration and Senator Don Nickles, the Oklahoma Republican in line to become chairman of the Budget Committee in the new Congress, opposed the increase.

Federal officials say they have no money to spare at a time when the federal government faces growing deficits, after four years of surpluses.

Mr. Scheppach cataloged some of the states' needs. After the Sept. 11 attacks, President Bush sought $3.5 billion to train and equip local police officers, firefighters and rescue workers, but Congress adjourned last week without providing the money.

Mayor Thomas M. Menino of Boston, president of the United States Conference of Mayors, said cities were spending $2.6 billion on new security measures without receiving any direct federal assistance.

With great fanfare, Congress passed legislation last month to clean up the nation's election procedures. But it provided none of the money promised to states to help them buy new election machinery and to train poll workers to comply with the law.

On Oct. 1, states lost $1.2 billion that had been appropriated by Congress to provide health coverage for low-income children. The money, unclaimed after four years, reverted to the Treasury, and Congress did nothing to restore it, despite pleas from states.





THE MAYOR'S BUDGET PLAN: OVERVIEW; MAYOR URGES PLAN FOR DRASTIC CUTS AND TAX INCREASES  (November 15, 2002)  $

FED CUTS KEY RATE BY ONE-HALF POINT IN AGGRESSIVE MOVE  (November 7, 2002)  $

World Business Briefing | Asia: Southeast Asia: Shifting Credit Outlook  (October 30, 2002) 

Pataki's Record: 2 Terms, Unexpected Turns  (October 30, 2002)  $

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