Many states consider tax hikes, spending cuts

The National Conference of State Legislatures paints a grim picture of the budget problems facing states around the country.

"This is shaping up to be the worst year for the states since the second World War," fiscal analyst Arturo Perez said.

Perez added up all the projected state budget deficits for the next fiscal year. The total is more than $80 billion.

The economic stimulus package President Obama signed into law this month will help. It includes money to help the states pay for infrastructure projects, Medicaid, unemployment insurance and other programs. But most states still have a long way to go.

One of the states in the toughest situations is Nevada. The collapse of the housing market hit that state especially hard.

"The governor is a Republican. He ran on a pledge of no new taxes. So he is proposing some dramatic cuts to higher education," Nevada public radio reporter Pam Dupre said.

Gov. Jim Gibbons wants to slash state university funding by 36 percent. But Dupre says there are enough Democrats and moderate Republicans in the Legislature to override a veto.

"What we'll end up with is a budget that has some significant cuts in it," she said, "but not as dramatic as the governor had proposed, and [there will be] some revenue enhancements."

Those revenue enhancements could include raising income taxes, sales taxes or the mining tax. In addition, America's gambling Mecca may even institute a state lottery.

"Las Vegas is close to the California border and so large numbers of Nevadans do cross the state line to buy California lotto tickets," Dupre said, explaining why Democrats in the legislature are considering a lottery.

California was another state with a huge deficit -- more than $40 billion. But last week lawmakers there finally agreed on a solution. They slashed spending on education and social services. They will ask for voter approval to borrow money, and they raised taxes.

"California increased its sales tax. It increased its vehicle license fee. And it also did a quarter percent increase in personal income taxes," said Julia Mitric, who covered the budget negotiations for Southern California Public Radio.

At least 19 states have either already raised taxes or have governors pushing for some type of tax or fee increase to help balance their budgets.

Democrats control the Legislature and the governor's office in Wisconsin. They recently raised taxes on hospitals and some corporations. And they are now one of the few states trying to tax Internet downloads, like songs purchased from Apple's iTunes Music Store.

"If you buy a CD from a brick and mortar store, you pay a state sales tax," Wisconsin Public Radio Capitol Reporter Shawn Johnson explained. "And so the thought is that this is sort of bringing the state into compliance with the new ways of the economy."

In states like Utah, where Republicans have firm control of the governor's office and the Legislature, tax increases are off the table for now. There, legislators are looking at shortening the school year, laying off some 3,000 state employees and trimming the budget for the justice system.

"They're talking about courts going to four days a week. They're talking about releasing prisoners early, and there would be fewer parole officers for the ones that are on the street," said Jenny Brundin a public radio reporter in Salt Lake City.

There's also a proposal that would allow Utah to avoid program cuts or tax increases. It comes from a company called Energy Solutions. The company would cover the state's entire shortfall, and bring in $1 billion or more over the next decade. But the Energy Solutions wants something in return.

"They've been trying to get Utah to allow them to accept foreign nuclear waste," Brundin said.

With strong opposition from the governor, Brundin says it's unlikely the state will accept Energy Solutions' offer this year.

And as far as we know, Minnesota is not considering a nuclear option. Republican Gov. Tim Pawlenty has proposed fixing the deficit with a combination of cuts and borrowing -- no tax increases. Democrats control the Legislature, and while they've criticized the governor's plan they haven't put forward a counter-proposal, yet.

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