Tax hikes, borrowing, reserves _ even tax cuts: 5 big states vary in tactics to fix deficits

California's governor wants to maintain temporary tax increases to keep $9 billion a year flowing to the state treasury. Low-tax Texas is considering tapping its rainy day account to soften the effects of deep spending cuts. New York's governor pushed through budget cuts while keeping a campaign pledge to avoid tax increases.
And residents of Illinois and Florida are getting a very different take on taxes: Illinois passed a massive increase, while Florida proposes giving its taxpayers a big break.
The five states are the nation's most populous but are taking very different approaches to solving their respective budget deficits, illustrating that the priorities of the majority party play as much a role in budgeting decisions as a state's fiscal health. If those states are a guide, there is no single model for how to close a deficit.
California, Texas, New York, Florida and Illinois collectively represent about one-third of all state spending nationwide, according to a report released in December by the National Association of State Budget Officers. Each is taking its own approach to dealing with the common problem of having less money to pay for programs already in place, as the Great Recession takes a deep bite out of government tax revenue.
It's too early to tell which approach will prove most successful.
In Florida, Republican Gov. Rick Scott's proposal to cut government spending to address the budget shortfall, and then cut more to give corporations and property owners a tax break, is an experiment that no other large state is trying. The idea is that short term pain for those who rely on state services can become a stimulus that will lead to long-term financial health.
In all, he's proposing $1.7 billion in tax cuts.
"There's more than one way to skin a cat, and there's certainly more than one way to reduce a budget deficit," said Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness. "It's reflective of different approaches to governing just in general. Down here, it's really a fairly strong anti-government, small-government mentality. It's certainly prevalent and you don't find that, in the big cities at least, in California and Illinois."
Florida's budget gap is about $3.7 billion, about 5 percent of its current $70. 5 billion budget. Scott wants to make cuts to fill the hole and then begin gradually phasing out the state's corporate income tax, which, at 5.5 percent, brings in about $2 billion in revenue for Florida.
He also wants to cut property taxes and a variety of fees and lesser taxes. He's sought advice from Donna Arduin, who has previously helped prepare budgets for Republican governors in New York, California and Michigan, as well as former Florida Gov. Jeb Bush.
Arduin said she believes Florida will be better off if the Legislature goes along with Scott and thinks long-term. She said there is a correlation between the size of state government and the strength of the private-sector economy.
"The best way to improve your budget is to improve your economy," said Arduin, president of Arduin, Laffer & Moore Econometrics.

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