Corzine First to Face Voters as Governors Brace For Backlash
The governor, a former chairman of Goldman Sachs and the only incumbent up for re-election this year, is trailing his likely Republican opponent amid voter anger over the economic crisis — and the steps hes taking to deal with it: a fiscal 2010 budget that lops 9 percent from the current one, a wage freeze and unpaid furloughs for state workers, and possible cuts in property-tax rebates along with higher taxes on the wealthiest residents and on cigarettes and alcohol.
Corzine, 62, is the first governor to feel political wrath; he wont be the last. The 50 U.S. states are facing combined deficits of as much as $370 billion over the next 2 1/2 years, according to the Center on Budget and Policy Priorities. President Barack Obamas economic-stimulus package will probably cover just $140 billion of that, the center says, leaving states with two choices: cut spending or increase taxes.
“Its a rock and a hard place for every state,” says Joe Seneca, a former chairman of New Jerseys Council of Economic Advisers and an economics professor at Rutgers University in New Brunswick. “State reductions are still necessary despite the federal support, and that will again further weaken the economy.”
Balancing the Budget
Unlike the federal government, most states must balance their budgets. And when they try to erase deficits by raising taxes and cutting jobs, they risk further damage to the economy because people with less money wont spend as much.
While Democrats captured the presidency in November to go with their control of both houses of the U.S. Congress, the anger at the state level knows no party; whoever is in power is fair game.
A list of governors who may be in trouble in 2010 compiled by the Cook Political Report in Washington includes Democrats Corzine, Bill Ritter of Colorado, Pat Quinn of Illinois, Chet Culver of Iowa and Jim Doyle of Wisconsin, along with Republicans Jan Brewer of Arizona, Jim Gibbons of Nevada, Tim Pawlenty of Minnesota and Charlie Crist of Florida. Democrats currently hold 19 of the 36 governorships that will be up next year.
High Visibility
“People are following whats going on in their states pretty closely,” says Michael Dimock, associate director of research at Washingtons Pew Research Center. “What they get out of their local government is often so much more visible.”
Like many governors, Ritter, 52, is struggling with the current years deficit. He instituted a hiring freeze, delayed construction projects for new schools and proposed the elimination of a planned expansion of health-care for children, among other steps likely to be noticed by his constituents.
Quinn, 60, last week proposed a $3.15 billion increase in personal and corporate taxes as he struggles with an $11.6 billion budget deficit in Illinois. He also asked lawmakers to cut pension contributions and increase fees for items such as car registrations.
Furloughs and Freezes
While furloughs and hiring freezes have helped some states avoid massive layoffs, the preservation of jobs isnt likely to last. In the aftermath of the last recession, state-employee payrolls dropped by about 75,000, says Nicholas Johnson, who directs the State Fiscal Project at the Washington-based Center on Budget and Policy Priorities.
“Its a problem we havent fully seen the ramifications of yet,” Johnson says. Local governments are also likely to suffer more than in the last recession as they lose state funds and face an economic collapse without a corresponding real-estate boom to provide property-tax revenue, he says.
In Ohio, where Governor Ted Stricklands budget director in January released a 15-page list of program cuts, Columbus Mayor Michael Coleman was forced to send layoff notices to a class of police cadets poised to graduate.
Obamas $787 billion stimulus package saved the jobs of those 25 recruits. “You have studied hard, you have trained tirelessly, and there is no longer any doubt that you will be employed as officers of the law when you leave here today,” Obama, 47, said at their graduation during a March 6 visit.
Life Preserver
Still, those jobs may be in danger again a year from now. Coleman, 54, says the one-time government grant was a “life preserver,” without which “we would have sunk or drowned.” But the city still must attract new business and take further steps to close its budget gap.