State budget crisis looms over governors meeting

Confronting crushing budget woes, many of the nation's governors are calling for painful spending cuts. But beyond that, their approaches are diverging drastically, from union-cramping proposals in Wisconsin and other states to higher taxes in Illinois and elsewhere.

Most states' chief executives are struggling to plug massive budget holes without pushing unemployment higher and hampering a fragile post-recession recovery, and that's setting a worrisome atmosphere as they gather in Washington for their winter meeting.

Not all are coming; some are choosing to stay at home to wage budget battles with their legislatures.

The financial emergencies - and what to do about them - will be issue No. 1 over the next three days. Issue No. 2 is certain to be one prescription that's been in the headlines: Republican Gov. Scott Walker's effort in Wisconsin to strip bargaining rights from many state employees. It's prompted weeks of protests and outcry.

"We have to balance our budgets. We have to address costs. And we also have to move forward at the same time," said Maryland Gov. Martin O'Malley, the head of the Democratic Governors Association after his group met with President Barack Obama and Vice President Joe Biden at the White House. "We're not bracing for the worst. We're preparing for the best. And the best we can do right now is create jobs."

Texas Gov. Rick Perry, chairman of the Republican Governors Association, cast blame on Washington for much of the turmoil states are facing, saying: "The fact is that Washington, D.C., is trying to tell all of us how to run our states with way too much specificity, and the costs of that is what's driving the deficits in our country."

True or not, the situation is grim.

A day before the National Governors Association gathering began, the Commerce Department reported that state and local responses to growing budget crises were undercutting the national recovery, weighing down economic growth in the final three months of last year. Obama is counting on that recovery to propel him to re-election next year, and the governors are well aware of the political stakes in their states as well.

States have weathered two brutal budget years in which they sliced spending and laid off workers. Now, they face a third challenging year with federal stimulus money drying up and lower-than-expected tax collections coming up.

Over the past two months, governors' state-of-the-state speeches have been peppered with talk of tough budget choices, more streamlined services and job-creation strategies.

"Government redesign efforts are a part of virtually every aspect of state policy in 2011 as governors adjust to the new normal in the wake of the Great Recession," says John Thomasian, a director at the National Governors Association's Center for Best Practices. "Governors are focusing on consolidation, streamlining bureaucratic processes and controlling employee and pension costs, while at the same time doing as much as they can to spur job growth."

More than a dozen governors - Republicans and Democrats alike - have proposed plans to try to shrink the size of state government and make it more efficient by eliminating or combining agencies, boards and commissions. Several from both parties also want to cut the state work force to save money. And both Republicans and Democrats in some states are trying to overhaul pension systems.

But those similarities have largely taken a backseat to more high-profile budget proposals.

Democratic Illinois Gov. Pat Quinn was lambasted after signing a 66 percent temporary personal income tax increase and a separate corporate rate hike to help close a $15 billion budget gap. Among other Democrats following his lead: California Gov. Jerry Brown has promoted a package of temporary tax increases as a ballot measure for voters to consider; Connecticut Gov. Dan Malloy has proposed a budget that raises taxes on everything from personal income to haircuts, and Minnesota Gov. Mark Dayton is pushing $3.3 billion in new taxes, primarily by raising rates on top earners.

But, in a twist, it's not the tax hikes that have caused the most heartache in states lately. It's the Wisconsin anti-union measure, as well as similar proposals by Republican governors in Ohio and Indiana that have dominated the budget discussions and led to massive protests.

Ahead of the weekend bipartisan meeting, O'Malley criticized Walker's approach, saying "extremism and ideology is trumping problem solving" in Wisconsin and "when you try to vilify, make one side of the equation the enemy, I think you're asking for trouble."

He added: "I don't think the drama and the circus going on with this drive to eliminate unions ... has anything to do with creating jobs."

Republican Perry said each state is different, and he defended Walker, saying: "He knows what he believes in and he's expressing that, and the voters in Wisconsin said this is the person we want running the state."

Asked if Walker was overreaching, Perry said: "No."

It was a preview of the partisan lines likely to be drawn during the governors' gathering, which is usually a bipartisan affair focused on problem-solving strategies.

After huge victories last fall, Republican governors have used their new perches to undercut several parts of Obama's agenda, including his health care plan and high-speed rail proposal, and several have sought to hamper the power of unions, a key Democratic voting bloc.

Obama, for his part, invited only Democratic governors to the White House for a private meeting ahead of the weekend's events, a first in recent memory. He also came out publically against Walker's proposal.

All that ensures a far more spirited gathering than in years past.