States' only option now is budget pain

Healthcare, parks, schools: Politicians' proposals to close budget gaps would hit where it hurts. Even zoo animals may not get a break.

By Ashley Powers and Richard Fausset

February 8, 2009

Reporting from Atlanta and Las Vegas — They have plundered reserves, enacted hiring freezes and engaged in all manner of budgetary voodoo to shield us from the pain.

But now state governments -- reeling from a historic free fall in tax revenue -- have run out of tricks. And Americans are about to feel it.

In some cases, they already have.

Nevada resident Margaret Frye-Jackman, 71, was diagnosed in August with ovarian cancer. She had two rounds of chemotherapy at University Medical Center, the only public hospital in the Las Vegas area.

Soon after, she and her daughter heard the news on TV: The hospital's outpatient oncology services were closing because of state Medicaid cuts. Treatment for Frye-Jackman and hundreds of other cancer patients was eliminated.

Luckily, Frye-Jackman's gynecological oncologist, Dr. Nick Spirtos, decided to open a tiny chemotherapy center in his office's empty storage room.

Today, he treats Frye-Jackman there, along with about 20 more cancer patients who were dumped by the hospital. Frye-Jackman's care is paid for with Medicare and supplemental insurance, but other patients can't cover the cost of full treatment. The doctor has considered putting donation boxes in the lobby.

"If this is what it's like in Nevada, with cancer stuff closing, is it like that everywhere?" said Frye-Jackman's daughter, Margaret Bakes, accompanying her mother to the doctor's recently. "Are all the other states closing stuff too?"

The answer, in at least 39 states, is "yes" -- or "soon." With personal, sales and corporate income tax revenue plummeting, state governments -- which recently trimmed their budgets to cover a cumulative $40.3-billion shortfall for the current fiscal year -- are now watching in horror as a $47.4-billion gap opens for 2009.

And for fiscal year 2010, they will face a $84.3-billion hole, according to the National Conference of State Legislatures. The total shortfall through fiscal 2011 is estimated at $350 billion, according to the Center on Budget and Policy Priorities, a nonpartisan think tank in Washington.

Unlike the federal government, nearly all states must balance their budgets. So legislatures either have to raise taxes, borrow money from dwindling rainy-day funds, or cut. The last option is becoming increasingly common.

"The easy budget fixes are long gone," Corina Eckl, fiscal program director for the National Conference of State Legislatures, said in a statement. "Only hard and unpopular options remain."

State lawmakers can expect some relief from the federal stimulus package -- but it is far from a cure-all. The version passed by the House of Representatives would cover only about 45% of the projected state deficits. A Senate version of the bill, which has yet to be approved, would, in its present form, offer even less relief.

The budget-cutting plans that have emerged from state capitols so far have a potential effect on almost everyone. Parks will close. Environmental programs will be scaled back. Bus and ferry routes will shut down, possibly sending more drivers onto clogged streets and highways. Schools may go without school nurses, and classes may become more crowded. Sick people who rely on state health programs may instead get sicker.

Washington state's predicament illustrates the brutal reality lawmakers are facing in the hardest-hit states. Washington's budget gap for 2010 will total 18.5% of its general fund, making it the sixth-worst situation in the nation. (Nevada is facing the most serious shortfall, with a 38% gap; California's 22% gap is the fourth-worst, behind Arizona at 28% and New York at 24%, according to the National Conference of State Legislatures.)

The Evergreen State must close a $5.7-billion shortfall in the next two years. Raising taxes there, as in many other states, continues to be an unpalatable strategy for politicians: Democratic Gov. Chris Gregoire, amid a tough reelection bid last year, made a no-new-taxes pledge and appears to be sticking to it.

That leaves lawmakers in the Olympia statehouse slugging it out over what to cut.

The governor has proposed pay freezes and layoffs for teachers and other state employees, a $350-million reduction in funding for higher education, closure of 13 state parks, early release for low-risk prisoners, and a 42% reduction in the state's popular health insurance program for the working poor -- a program that provides last-resort coverage to 104,000 people.

The plan also would eliminate cash grants and health insurance for about 16,000 state residents who are temporarily disabled. The proposal wasn't some exaggerated public relations ploy to lure federal stimulus cash: In fact, it already factors in about $1 billion in federal aid. The reality has been sobering for a state that has prided itself on generously funded social programs.

"The cuts are incredible. They absolutely shred our healthcare system. I think you'll instantaneously see 60,000 more uninsured in our state," said Cassie Sauer, spokeswoman for the Washington State Hospital Assn. "They'll probably get sicker, and some of them will die."

Others across the nation are also coming to grips with disappearing services.

In Florida's Broward County, six to 10 drug-addicted women convicted of nonviolent crimes are stuck in jail and waiting to be admitted, along with their children, to a family drug recovery center whose budget has been slashed. They have been given probation contingent on admission to the center, but there's no room for them.

All 16 family slots at the Susan B. Anthony Recovery Center are full. Seven other slots were eliminated when the center lost $51,000 in funding. Ironically, the result could be a net financial loss to Florida. The center says it saves the state $3 for every dollar spent because it keeps women out of jail and their children out of foster care.

"You pay now, or you pay double later," Executive Director Marsha Currant said.

In the hamlet of Tubac, Ariz., residents are wondering whether state cuts will render it a ghost town. It's a community of 2,000 people and 120 artists' studios about 50 miles south of Tucson. The main lure for visitors, and their dollars, is Tubac Presidio State Historic Park, which preserves the remains of a 17th century Spanish settlement.

But after the Legislature lopped $1.6 billion off this year's budget, the state announced that the park could close as soon as this month.

"Tubac, like the rest of the state, is so dependent on tourism dollars," said Carol Cullen, executive director of the Chamber of Commerce. "To close it is crazy."

Arizona is expected to close eight state parks -- nearly a third of its total. Parks Director Ken Travous described the situation as "between brutal and absolute carnage."

In New York, the state's 76 zoos, aquariums and botanical gardens are bracing to lose all of their state funding next year, under a proposal by Democratic Gov. David Paterson. Those cuts, combined with a loss in the value of their endowments and fewer membership renewals, could result in reduced visiting hours, slashed educational programs, higher admission prices and deep employee layoffs.

Animals will pay the price, said Jon Dohlin, director of the New York Aquarium. Some won't be replaced when they die, and others could be sent to other facilities.

"I'm not going to look my walrus in the eye and tell him he's got to find somewhere else to work," Dohlin said.

At the aquarium Thursday, students from University Neighborhood High School in Manhattan had just finished a tour for science class. Officials from the Wildlife Conservation Society, which manages the aquarium and the Bronx Zoo, say educational programs could be among the first on the chopping block.

"Just to have these places as resources is important for anyone to come and learn," said science teacher Jaclyn Hoahing. "Our kids live in the city, and they don't get a chance to see wildlife around them."

In the foundering economy, officials in Muscogee County, Ga., should be thrilled that they are about to receive more than 28,000 new residents over the next two years -- the result of the Army moving a tank school from Ft. Knox, Ky., to Muscogee's Ft. Benning.

Instead, Muscogee officials are worried that they can't handle the flood of new public school students -- some 4,000 of them -- who are on the way. The school district already cut $2.8 million out of its budget this year in response to state funding reductions. The state reductions may be more than $5 million next year, when the first wave of students begins showing up.

School district officials are drafting a letter to the state asking for an exemption. "We are being squeezed from both ends," said Myles Caggins, the school district's chief of operations and facilities.

Budget trouble has even arrived in Alaska, where Republican Gov. Sarah Palin had been anticipating a comfortable surplus -- fueled by the summer's high oil prices -- of at least $5 billion.

No more.

With the double whammy of a declining economy and sharply lower oil prices, Palin announced last week that spending in the current fiscal year would have to be trimmed by $268.6 million to make up for a total shortfall of $1.65 billion.

Much of the savings Palin expects to realize is in delayed oil tax credits, not actual spending cuts. The remainder of the shortfall will have to come from additional cuts, or the state's estimated $7 billion in savings.

Palin is more ambitious than most governors these days. In her recent State of the State address, she announced she was resurrecting a long-dreamed-of plan to build a road across the wilderness from Fairbanks to Nome. Total cost: $2 billion.

Palin has not said where the money would come from.


LA Times staff writers Nicholas Riccardi, Erika Hayasaki, Kim Murphy, David Zucchino and Bob Drogin contributed to this report.