January 6, 2011
Congress unlikely to extend hand to ailing states
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"The economy is not going to improve as fast by increasing the unemployment rate. And whether in the public sector or private sector, a job is a job is a job," Steinberg said. "We know that's what the Republicans ran on in part during the national campaign, so we recognize we're going to have do deal with reality, and we will."

A slowly improving economy means many states should see an uptick in tax revenue in the coming year, but it will not be enough to replace the stimulus money. Without federal aid, the majority of legislatures around the country will not have enough money to maintain current services and face another round of budget cutting.

States closed a cumulative budget gap of nearly $84 billion in the last fiscal year. In the coming year, 31 states and Puerto Rico face budget shortfalls totaling $82.1 billion, according to the National Conference of State Legislatures.

"You have the federal money running out, but very deep state budget problems are lingering," said Phil Oliff, a policy analyst at the Center on Budget and Policy Priorities, a liberal think tank based in Washington. "That's why we say the coming fiscal year could actually be the worst budget year states have faced since the start of the recession."

There also is a sense among many governors that seeking more temporary aid would delay tough decisions about what the states can afford in the long-term.

Governors are facing an era of slow economic growth combined with growing pension liabilities, said Ray Scheppach, executive director of the National Governors Association. Most know they must get spending down to a sustainable level, he said.

Illinois' spending is so out of whack that Democratic Gov. Pat Quinn wants to borrow at least $3.7 billion to cover this year's payment for the state's public pension systems, and state contractors are being forced to wait six months or more to get paid. Its $15 billion deficit for the coming fiscal year is 58 percent of the state's entire general fund.

Federal stimulus money provided a big boost to the state - some $13 billion total, with more than 40 percent of that going to unemployment insurance and more than $3 billion to education.

Quinn's budget spokeswoman, Kelly Kraft, said the state has received 92 percent of what it's owed in stimulus money and that it's too early to say whether it will receive more in the coming fiscal year.

"There's an unspoken hope among a lot of people that the federal government will come in and help out the states again," said Rep. John Bradley, a Democratic Illinois state lawmaker who chairs a finance committee. "I'm not part of that group."

Bradley said he is not convinced that Congress would ease any requirements to lessen the states' burden for mandated programs, and said economic recovery programs already had relieved states of many traditional mandates.

"We don't have the tax base we once had. The loss of American manufacturing has caught up to us," he said. "We have to cut back on services or tax the reduced base at a higher rate."

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Associated Press writers Judy Lin in Sacramento, Calif., and John O'Connor in Springfield, Ill., contributed to this report.

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Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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