Budget & Taxes
TO TAX OR NOT TO TAX: In his state of the state speech last week, New Jersey Gov. Chris Christie (R) called for a 10-percent across-the-board cut in the state's income tax.
"This will send a loud signal," he said. "The New Jersey comeback has begun."
The spending plan released last month by Maryland Gov. Martin O'Malley (D), on the other hand, called for raising taxes on residents earning six-figures a year or more.
"I don't like asking for this; I don't like doing this," he said at a State House news conference. "But in order to get us through this recession in advance of other states, and in order to protect the priorities of the people of our state and the futures of our children, there are difficult things we need to ask of one another...this is one of them."
The two divergent proposals represent the policy poles of an issue that is shaping up to be a major one this year: taxes. Lining up alongside Christie on the tax-cut side are the governors of at least half a dozen other states, including Kansas Gov. Sam Brownback (R), New Mexico Gov. Susana Martinez (R), Iowa Gov. Terry Branstad (R), Nebraska Gov. Dave Heineman (R), Alaska Gov. Sean Parnell (R) and South Carolina Gov. Nikki Haley (R).
On the tax-hike side along with Gov. O'Malley are fellow Democratic Govs. Jerry Brown of California, Chris Gregoire of Washington and Beverly Perdue of North Carolina.
For the four Democrats, increasing taxes is the only viable option for maintaining state services that have been decimated by budget cuts over the last few years. Gov. Gregoire, for instance, wants Washington voters to approve a temporary half-cent sales tax increase to put money back into schools and the state's "frayed" safety net.
"Without the half penny, we lose far more than we gain," she told lawmakers this month. "We lose our future, our values and our way."
Gov. Brown, likewise, wants California's voters to approve a temporary increase in the state sales tax and the income tax on residents making $250,000 or more a year to, among other things, avoid having to shorten the public school year.
Some Democrats are also looking to taxes to pay for key projects. For example, Gregoire wants to impose a $1.50 fee on every barrel of oil produced in Washington to fund a 10-year transportation package.
The Republican governors, however, argue that cutting taxes will enable families to buy more and encourage companies to hire more, spurring economic growth.
"These taxes must be reduced," Gov. Branstad said in his state of the state address, referring to his proposed 40 percent cut in commercial and industrial property taxes, "not because they cost businesses money, but because they cost Iowans jobs."
With revenues showing signs of recovery some Republican governors are also inclined to give money back to taxpayers rather than increase spending.
"Let others choose tax increases," Christie said in his state of the state. "We choose responsible tax cuts to give our overburdened citizens real relief." (STATELINE.ORG, WASHINGTON POST)
OK PROSECUTORS USING PROBATION TO PAY BILLS: Oklahoma prosecutors are relying on a novel program to help them maintain staffing levels in an environment of shrinking state budgets. Established in 2003, the program allows state prosecutors to recommend supervision by district attorney's offices for criminal offenders as an alternative to prison, jail or traditional probation.
Offenders in the "DA supervision" program are charged a $40 fee just like the state's prison department charges probationers. But the DA program has ballooned from 16,000 participants in 2008 to 38,000, far exceeding the 21,000 in the state prison system's probation program. That has some critics asking how much supervision prosecutors are providing for the fees they're charging, which totaled nearly $14 million last year.
Some DA's offices "don't provide any supervision that I'm aware of, and I mean any," said Allen Smallwood, former president of the Oklahoma Bar Association.
Prosecutors maintain the program increases public safety by covering offenders who might receive no supervision at all otherwise, while at the same time allowing DA's offices to maintain staff in spite of a 23 percent reduction in state funding over the last three years.
But Emily Redman, chairwoman of the Oklahoma District Attorneys Council, said prosecutors are aware of the sizeable problem they now face: overcoming "the perception that this program is just about collecting money." (WALL STREET JOURNAL)
BUDGETS IN BRIEF: The Obama administration announced a change in the rules for prescription drug pricing under Medicaid that it says will reduce the program's costs for states and the federal government by $17.7 billion over the next five years. Mandated by the federal health reform law, the new rules are based in part on a program pioneered by ALABAMA, which covers prescription drugs at the rates pharmacies actually pay for them instead of the rates provided on drug company price lists (STATELINE.ORG). • A report from the MICHIGAN League for Human Services says the tax plan passed by the state last year will hit poor families 1,000 times harder than wealthy ones. According to the report, taxes will increase by 1 percent on families earning less than $17,000 a year, but increase only .001 percent on families earning more than $334,000 (MLIVE.COM). • MASSACHUSETTS Gov. Deval Patrick (D) released a $32.3 billion budget plan last month that would boost education spending by over $4 billion, eliminate 400 positions in the state's executive branch and shut down the Bay State Correctional Center in Norfolk (BOSTON GLOBE). • FLORIDA House Speaker Dean Cannon (R) released a budget proposal last month calling for an additional $1 billion in education spending statewide. Sen. David Simmons (R), chair of the Senate subcommittee on Pre-K-12 education appropriations, said he hoped to raise that figure by about $300 million (MIAMI HERALD). • TENNESSEE Gov. Bill Haslam (R) has proposed a $30 billion state budget for 2012-13 that provides new funding for economic development and education but also eliminates 1,166 positions across state government (CHATTANOOGA FREE PRESS). • Also in TENNESSEE, a 73-17 vote last month in the House of Representatives - and the approval of a companion measure in the Senate last year - advanced a state constitutional amendment banning any state or local income or payroll tax to the next two-year legislative term, in 2013. If the "No State Income Tax" amendment is again approved by a two-thirds majority in both chambers, it will go before the voters in November 2014 (MEMPHIS COMMERCIAL APPEAL). • Federal officials have rejected several elements of UTAH's request for greater flexibility in reforming its Medicaid program, including a planned increase in the Medicaid co-pay from under $3 to $6 (DESERET NEWS). • An OHIO legislative panel gave the go ahead for the state to launch the JobsOhio economic development program, despite the Kasich administration's decision not to disclose how it will determine whether Ohioans are getting a positive return on their $100 million a year investment in the program (COLUMBUS DISPATCH). • Exxon Mobil has agreed to pay MONTANA $1.6 million in penalties for water pollution caused by a pipeline break last summer that fouled miles of shoreline along the Yellowstone River (GREAT FALLS TRIBUNE). • According to estimates from nonpartisan legislative analysts, Facebook's initial public offering could bring as much as $1 billion in revenue to CALIFORNIA, which is still in fiscal crisis, facing a projected budget shortfall of over $9 billion. "If it is as big as it is being billed, then on behalf of a grateful state, I will go to Mark Zuckerberg's house and either wash his windows or mow his lawn," said a spokesman for Gov. Jerry Brown (D) (STATELINE.ORG).
- Compiled by KOREY CLARK
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