Budget deadline ticks down for states

Legislatures in Arizona and Pennsylvania grapple into the night as the prospect of government shutdowns looms.

By Nicholas Riccardi and P.J. Huffstutter

July 1, 2009

Reporting from Indianapolis and Denver — Across the country, state legislators and governors struggled Tuesday night to agree on spending cuts and tax hikes as they ran up against a midnight deadline to approve a budget.

The day began with 14 states lacking a final budget signed by the governor. By evening, several had come to some agreement.

But some states -- most significantly, Arizona and Pennsylvania -- faced the specter of a government shutdown for failing to have a budget in place by the start of the new fiscal year today. Two others -- Ohio and North Carolina -- basically conceded that they needed more time by passing legislation to allow government business to continue into July while they keep debating.

California lawmakers were working into the night trying to revise the hopelessly out-of-balance state budget.

Last-minute brinkmanship is par for the course in state budget fights, and midnight votes are not unheard of in normal years. But the number of states flirting with shutdowns or special sessions this year is extraordinary, said Brian Sigritz of the National Assn. of State Budget Officers.

"For states, this downturn is one of the worst, if not the worst," he said, adding that it was the first year in his organization's history that state spending had dropped for two years in a row. "Late budgets are more common in bad times than in good."

For some states, the deadline forced legislators to compromise. Democrats in Indiana's General Assembly grudgingly passed a two-year, $28-billion budget after Republican Gov. Mitch Daniels began sending notices to state workers explaining what to do in the event of a shutdown.

The Republican-dominated Senate followed suit Tuesday evening, even though the budget had less education spending than many wanted. "It's tough medicine," said state House Minority Leader Brian Bosma, a Republican from Indianapolis. "But it's the responsible thing to do."

In other states, conflict showed no signs of abating.

In Arizona, Republicans thought they had resolved an intraparty dispute between anti-tax conservatives and GOP Gov. Jan Brewer -- who had called for a temporary tax hike to preserve vital services -- by agreeing to place the tax increase on the November ballot. But a key state Senate committee rejected the deal. State parks ordered campers to leave in expectation that a government shutdown would close them today.

Key aides and officials held out hope that the dispute could be resolved before midnight. "The governor is continuing to work closely with legislative leaders to accomplish passage today," Brewer spokesman Paul Senseman said late Tuesday afternoon.

Legislators also scrambled to write a measure to allow the state government to function if they missed the deadline, although some conservatives argued that a shutdown would be best. "We need to right-size Arizona's government, and we need to do it quickly," GOP state Sen. Ron Gould told the Arizona Republic. "If we have to shut down government to do that, so be it."

Arizona has never missed its June 30 budget deadline, but Pennsylvania has done so every year since 2003. This year will be no different. Democratic Gov. Edward G. Rendell and Republican legislators remain far apart on a budget deal and predict the standoff could last until late summer.

"We are very far apart," state Senate Majority Leader Dominic Pileggi, a negotiator, said late Tuesday. "There is zero possibility we are going to have the budget done tonight."

Pennsylvania's 80,000 workers are bracing for their pay to dwindle to nothing after mid-July. Many flocked to local banks and credit unions to take out special zero-interest loans.

In Connecticut, Republican Gov. M. Jodi Rell said she had the authority to keep state operations running via executive order if she vetoed a budget proposal from the Democratic Legislature to increase taxes by $2.5 billion.

In Illinois, Democratic Gov. Pat Quinn threatened to veto a budget from the Democratic Legislature for failing to implement his proposed tax hike.

In Mississippi, Republican Gov. Haley Barbour called legislators back into session Sunday to pass a budget that included a special Medicaid funding package. Late Tuesday, it was unclear if the sides could agree. Barbour contended that he could keep government running by executive order if a deal wasn't reached by midnight.

Even though several states had completed budgets, officials will probably have to revisit them because revenue continues to plummet, said Todd Haggerty of the National Conference of State Legislatures.

He noted that last year, states cut $32 billion in spending, then had to frantically cut another $60 billion after July 1 because tax receipts tailed off.

"There's a definite possibility, unless revenues improve soon, that states are going to have to continue to make these hard decisions and revisit these budgets," Haggerty said.