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CNN Live Today

State of the States

Aired July 01, 2003 - 11:18   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.


DARYN KAGAN, CNN ANCHOR: Now while New Jersey and California are in the worst shape, 45 states have raised taxes or made deep cuts in services. How do they go from the '90s, which were boom times, to the millennium bust so quickly? That's a good question for our David Brancaccio, the long-time host of public radio's "Marketplace." And he is with us from a city in a troubled state this morning.
David, how about that? The lights are still on in California?

DAVID BRANCACCIO, HOST, PUBLIC RADIO'S "MARKETPLACE": I was checking to make sure the street lights are on. At the moment, they are on, but there are some folks who are watching this closely, because it could mean their jobs. We were just talking about New Jersey. Their entire state budget, the whole budget, $24 billion. California's budget gap, just the deficit, is $38 billion. It's just so huge that our state legislature and our governor can't come to grips with it.

KAGAN: We heard about states being in trouble before. And usually, they just kind of go and borrow some more money. Why are the states at a breaking point this time?

BRANCACCIO: Well, out here in California, for instance, we get a lot of our revenues from capital gains taxes, if people's stock goes up. It sure did in the 1990s, a lot of those Silicon Valley folks, for instance, did very well.

Well, the stock market has been OK over the last three months. That's not doing us much good out here in California balancing the budget. We need more. There are not a lot of tax receipts from capital gains, because there's no capital gains. Hence the problem with the budget.

Now across the country, what you are seeing is mirrors of this. Perhaps not as pronounced as in California, but the economy is down. When the economy is down, there's not a lot of money to pay taxes on.

And here's the thing, let's say you are in one of the states -- there are 37 states with one of these budget deficits. That's an extraordinarily high number.

But say you are lucky enough to be in a state that does not have a budget deficit. You think this doesn't have anything to do with you. Well, it's estimated all these budget deficits across the country are costing the economy's 1 percent. You say 1 percent, so what. Look, the economy only grows 2 percent, 3 percent, 4 percent a year, when we're lucky. When you take off 1 percent, it really costs jobs around the country.

KAGAN: Even if you are not living in one of these hurting states, you should care, as you explained. Also, as an indication of a bigger picture of what's going on, isn't California's economy by itself like the third or fourth largest economy in the world?

BRANCACCIO: It really is extraordinary. And so we buy a lot of things from other states, we but a lot of things from around the world, but we also export a lot. So it's a key player here, but it's a very meddlesome issue for, for instance, the California state legislature. You have Democrats that are proposing raising the sales taxes to make ends meet. That's a very regressive tax. Even poor people pay a lot of it, and then you have Republicans who have an idea of balancing the budget by increasing the age at which young kids can go to kindergarten for the first time. So what that means, is if that passes, we get to the fall, and we have a lot of folks stay home. Well, what are the families -- what are they going to do? They are going to have to pay for child care. Where will they get that money? Probably from that $400 per kid tax credit that President Bush handed to us. So easy come, easy go.

KAGAN: Which would last all about a week and a half for folks paying full time day care there.

Now New Jersey, they went after the casinos and raised taxes on them.

BRANCACCIO: Yes, in fact, trying to do that, there were other proposals in New Jersey that were put down; for instance, increasing the amount of money it costs you if you buy a new house, the actual fee you pay to the state. They're still wrestling with that one.

What's important to note, though, is that the states aren't actually stopping all business. This is a phased-in thing, not a crisis in California, not a crisis in New Jersey this morning.

But you get out a couple more weeks, and it will be a crisis. You will have community colleges in California shutting down. You will have state workers being paid minimum wage. And as of this morning in California , any contractors, private contractors, or vendors who sell things to the state, don't get paid.

KAGAN: And basically when people think of state budgets, as I was saying at the top, unless you're really into this, like you, David, your eyes might glaze over.

BRANCACCIO: Fascinated by this.

KAGAN: I know this is the good stuff for you. But for the rest of us, it's when you show up and that state service isn't there, I think that's when people will kind of figure out what the crisis is.

BRANCACCIO: Yes, if you show up to attend at a community college class this summer and there's no teacher or the door is closed. And we will see more of that as the summer goes on unless the state legislatures can come together and form some sort of consensus. But at the moment, things are very, very polarized in California, with a very unpopular governor, and a legislature that is to the left and right, with not a lot of middle ground.

KAGAN: Well, there is that whole recall effort that the Governor Gray Davis is fighting and facing, a story for another time. But we appreciate you helping us understand the state budget crisis across the country.

David Brancaccio from NPR, appreciate it. Good to have you on, as always.

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 July 1, 2003 - 11:18   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DARYN KAGAN, CNN ANCHOR: Now while New Jersey and California are in the worst shape, 45 states have raised taxes or made deep cuts in services. How do they go from the '90s, which were boom times, to the millennium bust so quickly? That's a good question for our David Brancaccio, the long-time host of public radio's "Marketplace." And he is with us from a city in a troubled state this morning.
David, how about that? The lights are still on in California?

DAVID BRANCACCIO, HOST, PUBLIC RADIO'S "MARKETPLACE": I was checking to make sure the street lights are on. At the moment, they are on, but there are some folks who are watching this closely, because it could mean their jobs. We were just talking about New Jersey. Their entire state budget, the whole budget, $24 billion. California's budget gap, just the deficit, is $38 billion. It's just so huge that our state legislature and our governor can't come to grips with it.

KAGAN: We heard about states being in trouble before. And usually, they just kind of go and borrow some more money. Why are the states at a breaking point this time?

BRANCACCIO: Well, out here in California, for instance, we get a lot of our revenues from capital gains taxes, if people's stock goes up. It sure did in the 1990s, a lot of those Silicon Valley folks, for instance, did very well.

Well, the stock market has been OK over the last three months. That's not doing us much good out here in California balancing the budget. We need more. There are not a lot of tax receipts from capital gains, because there's no capital gains. Hence the problem with the budget.

Now across the country, what you are seeing is mirrors of this. Perhaps not as pronounced as in California, but the economy is down. When the economy is down, there's not a lot of money to pay taxes on.

And here's the thing, let's say you are in one of the states -- there are 37 states with one of these budget deficits. That's an extraordinarily high number.

But say you are lucky enough to be in a state that does not have a budget deficit. You think this doesn't have anything to do with you. Well, it's estimated all these budget deficits across the country are costing the economy's 1 percent. You say 1 percent, so what. Look, the economy only grows 2 percent, 3 percent, 4 percent a year, when we're lucky. When you take off 1 percent, it really costs jobs around the country.

KAGAN: Even if you are not living in one of these hurting states, you should care, as you explained. Also, as an indication of a bigger picture of what's going on, isn't California's economy by itself like the third or fourth largest economy in the world?

BRANCACCIO: It really is extraordinary. And so we buy a lot of things from other states, we but a lot of things from around the world, but we also export a lot. So it's a key player here, but it's a very meddlesome issue for, for instance, the California state legislature. You have Democrats that are proposing raising the sales taxes to make ends meet. That's a very regressive tax. Even poor people pay a lot of it, and then you have Republicans who have an idea of balancing the budget by increasing the age at which young kids can go to kindergarten for the first time. So what that means, is if that passes, we get to the fall, and we have a lot of folks stay home. Well, what are the families -- what are they going to do? They are going to have to pay for child care. Where will they get that money? Probably from that $400 per kid tax credit that President Bush handed to us. So easy come, easy go.

KAGAN: Which would last all about a week and a half for folks paying full time day care there.

Now New Jersey, they went after the casinos and raised taxes on them.

BRANCACCIO: Yes, in fact, trying to do that, there were other proposals in New Jersey that were put down; for instance, increasing the amount of money it costs you if you buy a new house, the actual fee you pay to the state. They're still wrestling with that one.

What's important to note, though, is that the states aren't actually stopping all business. This is a phased-in thing, not a crisis in California, not a crisis in New Jersey this morning.

But you get out a couple more weeks, and it will be a crisis. You will have community colleges in California shutting down. You will have state workers being paid minimum wage. And as of this morning in California , any contractors, private contractors, or vendors who sell things to the state, don't get paid.

KAGAN: And basically when people think of state budgets, as I was saying at the top, unless you're really into this, like you, David, your eyes might glaze over.

BRANCACCIO: Fascinated by this.

KAGAN: I know this is the good stuff for you. But for the rest of us, it's when you show up and that state service isn't there, I think that's when people will kind of figure out what the crisis is.

BRANCACCIO: Yes, if you show up to attend at a community college class this summer and there's no teacher or the door is closed. And we will see more of that as the summer goes on unless the state legislatures can come together and form some sort of consensus. But at the moment, things are very, very polarized in California, with a very unpopular governor, and a legislature that is to the left and right, with not a lot of middle ground.

KAGAN: Well, there is that whole recall effort that the Governor Gray Davis is fighting and facing, a story for another time. But we appreciate you helping us understand the state budget crisis across the country.

David Brancaccio from NPR, appreciate it. Good to have you on, as always.

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