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States Face Major Budget Problems

Aired January 28, 2003 - 14:07   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


KYRA PHILLIPS, CNN ANCHOR: The state of the union is one thing, but what about the states? The glory days of huge tax revenues and rock bottom unemployment are history, and the bad old days of deficits and cut backs are back.
CNN's Jon Karl joins us now to crunch some numbers -- hi, Jon.

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Hey. And what a turnaround, Kyra, for these states. And it is no accident that the Democrats tonight have chosen a governor, Gary Locke of Washington state, to give their official response to the president's State of the Union address.

Locke, just a short while ago, met with the top Democrats here on Capitol Hill. There you see him with Tom Daschle and Nancy Pelosi. They have chosen Locke, a governor, to highlight the very fact that the states are in such bad fiscal situation, that if you look at the state of the state...

(AUDIO GAP)

KARL: ... it's a very tough time for them. Take a look at just how widespread this problem. There are 37 states -- 37 of the 50 states that were forced to go back and make budget cuts after they had passed their budgets last year.

So this is in addition to the difficult choices they made to pass their budgets in the first place. They had to go back and take $12.8 billion out of their budgets during the course of the year.

And this is a problem -- states have been hit by a perfect storm, a perfect storm in terms of budget here. They have higher costs, because of escalating health care costs especially, and declining revenues.

Look at this. There were state receipts -- on aggregate, all 50 states fell by 6 percent last year. That is the first time in 50 years that there has been a decline in state revenues. So what are the states doing about it? Well, there's obviously a wide range of options the states have had to deal with.

Twenty-six states, more than half, are doing across the board cuts. Fifteen states are actually laying off employees, a pretty extraordinary measure for state governments. Five states are forcing employees into early retirement. Others are simply trying to reorganize their programs. And you see the new found popularity of slot machines. Many states are trying to look to gambling, to gaming as a way to get easy revenue to try to deal with their fiscal problems. It's a questionable source, some people wonder whether or not those kind revenues can really be sustained, but the bottom line is, going into this State of the Union address, the state of the states, from a budget standpoint, are very hurt.

And here you have California has been hit worse than any of the states. Consider this, Kyra. The state of California is considering having people that are crossing the Golden Gate Bridge, which you are seeing there, by foot, pedestrians to voluntarily pay a fee to cross the bridge by foot. That's how bad the situation is in California. They're actually looking for some creative ways to try to avoid some of the really tough choices that they are going to have to make no matter what -- Kyra.

PHILLIPS: All right. Jonathan Karl, thank you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com






Aired January 28, 2003 - 14:07   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: The state of the union is one thing, but what about the states? The glory days of huge tax revenues and rock bottom unemployment are history, and the bad old days of deficits and cut backs are back.
CNN's Jon Karl joins us now to crunch some numbers -- hi, Jon.

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Hey. And what a turnaround, Kyra, for these states. And it is no accident that the Democrats tonight have chosen a governor, Gary Locke of Washington state, to give their official response to the president's State of the Union address.

Locke, just a short while ago, met with the top Democrats here on Capitol Hill. There you see him with Tom Daschle and Nancy Pelosi. They have chosen Locke, a governor, to highlight the very fact that the states are in such bad fiscal situation, that if you look at the state of the state...

(AUDIO GAP)

KARL: ... it's a very tough time for them. Take a look at just how widespread this problem. There are 37 states -- 37 of the 50 states that were forced to go back and make budget cuts after they had passed their budgets last year.

So this is in addition to the difficult choices they made to pass their budgets in the first place. They had to go back and take $12.8 billion out of their budgets during the course of the year.

And this is a problem -- states have been hit by a perfect storm, a perfect storm in terms of budget here. They have higher costs, because of escalating health care costs especially, and declining revenues.

Look at this. There were state receipts -- on aggregate, all 50 states fell by 6 percent last year. That is the first time in 50 years that there has been a decline in state revenues. So what are the states doing about it? Well, there's obviously a wide range of options the states have had to deal with.

Twenty-six states, more than half, are doing across the board cuts. Fifteen states are actually laying off employees, a pretty extraordinary measure for state governments. Five states are forcing employees into early retirement. Others are simply trying to reorganize their programs. And you see the new found popularity of slot machines. Many states are trying to look to gambling, to gaming as a way to get easy revenue to try to deal with their fiscal problems. It's a questionable source, some people wonder whether or not those kind revenues can really be sustained, but the bottom line is, going into this State of the Union address, the state of the states, from a budget standpoint, are very hurt.

And here you have California has been hit worse than any of the states. Consider this, Kyra. The state of California is considering having people that are crossing the Golden Gate Bridge, which you are seeing there, by foot, pedestrians to voluntarily pay a fee to cross the bridge by foot. That's how bad the situation is in California. They're actually looking for some creative ways to try to avoid some of the really tough choices that they are going to have to make no matter what -- Kyra.

PHILLIPS: All right. Jonathan Karl, thank you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com