Finances of U.S. States Called Worst Since World War II By Robert Pear New York Times Monday, 25 November, 2002 WASHINGTON, Nov. 25 -- Plunging tax collections and soaring medical costs have created the worst fiscal problems for states since World War II, the National Governors Association said today. Governors and state budget officers said the fiscal condition of the states was more dire than the condition of the national economy. "Nearly every state is in fiscal crisis," the governors said in a new survey of the states. Raymond C. Scheppach, executive director of governors association, said the problems would affect people across the country. States, he said, are increasing tuition at public colleges and universities, cutting Medicaid eligibility and benefits, increasing taxes on individuals and corporations and laying off state employees. "You will see huge cuts in Medicaid," Mr. Scheppach predicted. Medicaid and other health costs, like employee health benefits, account for 30 percent of state spending and grew last year by 13 percent, the largest rate of increase in a decade, the report said. At a time when revenues are declining, Mr. Scheppach said, such growth is unaffordable and unsustainable. Relatively few of the newly elected governors have said precisely how they will deal with these fiscal problems. "Most of them don't understand how bad it is," Mr. Scheppach said. In a new "Fiscal Survey of States," the governors association found that "total state balances have plummeted by 70 percent," dropping to $14.5 billion in the current fiscal year, from a peak of $48.8 billion in 2000. The current balance represents 2.9 percent of state spending, the smallest cushion since 1992. Total state tax collections fell by 6 percent last year, even as spending grew 1.3 percent, the report said. Most of the tax changes in the last year affected tobacco levies. Nineteen states increased cigarette taxes, many by more than 50 cents a pack. Services account for a steadily growing share of state economic activity, but states have found it difficult, for political reasons, to increase taxes on services. Likewise, Mr. Scheppach said, "it's very hard to raise taxes on middle-income Americans, when they don't have secure health insurance, to pay for health care for low-income Americans." The Bush administration has opposed bipartisan efforts in the Senate to help relieve budget pressures on the states. Federal officials say they have no money to spare at a time when the federal government faces growing deficits, after four years of surpluses. Mr. Scheppach cataloged some of the states' needs. Congress and the White House had promised $3.5 billion to train and equip local police officers, firefighters and rescue workers, but Congress adjourned without providing the money. Congress provided none of the money promised to states to help them buy new election machinery and to train poll workers to comply with a new federal election law. On Oct. 1, states lost $1.2 billion that had been appropriated by Congress to provide health coverage for low-income children. The money, unclaimed after four years, reverted to the Treasury, and Congress did nothing to restore the money despite pleas from states. _________________________________________________________________ Help STOP SPAM with the new MSN 8 and get 2 months FREE* http://join.msn.com/?page=features/junkmail