State Budget Battles Loom Following GOP Wave

Facing an estimated $140 billion in budget shortfalls next year, a majority of state governments will have new leaders in what is expected to be the most difficult budget session in years.

States will have a record 28 states with new governors Jan. 1, while 21 legislative chambers are expected to change hands.

“That is the largest number of rookie governors in the history of the U.S.,” said Tim Storey, state elections analyst with the National Conference of State Legislatures, in a conference call with lawmakers and reporters Friday afternoon. “If voters wanted change, that is what they got at the state level.”

With the New York state senate appeared heading into Republican hands, the GOP is poised to assume leadership roles in 20 legislative chambers in the wake of an election that saw Republicans gain a total of 711 legislative seats.

While Republican leaders expressed optimism about confronting the challenges, analysts with NCSL said the budget outlooks in many states will be even more difficult to address than previously expected after Tuesday’s election results.

“There were tax cuts in several states as well as new spending measures without new revenue sources,” said NCSL Senior Fellow Jennie Bowser. “The bottom line is that in many states … the budget year is going to be tougher.”

Voters in four states rejected tax increase proposals on ballot initiatives that would have provided new revenues, while several other initiatives mandating new spending were approved. Some states also passed constitutional changes that will inhibit the ability of states to raise revenue, while some defeated measures that would have granted states more budget flexibility.

While state revenues remain below pre-recession peaks, they have been assisted by intermittent injections of federal spending from the $787 billion American Recovery and Reinvestment Act and a $26 billion federal aid package passed in August.

The aid allowed states to largely postpone deep budget cuts, but with Republicans taking firm control of the House of Representatives in January additional aid is considered unlikely.

Barring unforeseen revenues, states will be left with painful decisions: tax increases, deep spending cuts or some combination of both.

Following the Party’s historic victory Tuesday, Republicans appear well situated to steer events, but experts say that despite the Republican landslide (the Party is set to control the most seats it has held since the Great Depression) its edge is not overwhelming.

“When you combine the Governor and the statehouses you still have a fairly divided political landscape,” Storey said.

Democrats will control 20 Governor’s mansions and control in 17 state legislatures if election results hold. Seven other legislatures will be split.

Some of the Republican’s largest gains came in the South, where a steady and decades-long realignment of the formerly solid Democratic stronghold appears to be completing.

After claiming control of statehouses in North Carolina and Alabama, the GOP holds a majority of legislative seats and chambers in the South for the first time since Reconstruction, and Democratic losses likely would have been far worse if not for the fact that three of the four states not holding elections came from the South, analysts say.

“Had Louisiana, Mississippi and Virginia held elections this year, I suspect gains for Republicans would have been even greater,” Storey said.

While analysts had predicted steep Republicans gains in the South, victories other places were a bigger surprise.

For example, for the first time in history the Party claimed both legislative chambers in Minnesota, while in Maine it took control of both executive and legislative branches for the first time in a half-century. After gains in New Hampshire, Republicans now control the house by a margin of 3-1, while only five Democratic state senators were left standing.

Bill Black, a Senior Partner with Fleishman-Hillard who consults with NCSL, said Democratic losses were largely attributable to the loss of support among women voters and lower turnout among African Americans, whose makeup of the electorate fell from 13 percent in 2008 to 10 percent.

“An older and whiter coalition came out to vote,” Black said. “The Obama coalition didn’t come out to vote.”

While much of the attention on state elections has focused on the redistricting process scheduled to begin early next year, the most immediate challenge facing lawmakers will be confronting the bleak budget situation nearly all states are facing.

Storey said he anticipated most legislatures would have “little appetite for new taxes,” leaving budget cuts as a more frequent budget-balancing tool.

Asked about which programs are most likely to be targeted by lawmakers, NCSL Executive Director William T. Pound said many popular programs, such as corrections, already have experienced deep cuts in most states.

He said education, which accounts for 40 percent of the budget in many states, might be a popular target for lawmakers because of its sheer size.

“If you want to reduce spending you have to go there,” Pound said.