In economically ailing states, governors spell out plans to tame fiscal crises

Mired in crisis, states kick off legislative year

SACRAMENTO, Calif. — Governors in California, New York and Kentucky spelled out ambitious plans to create jobs and deal with a crippling financial crisis Wednesday at a time when states around the country are opening their legislative sessions under an ominous cloud of economic uncertainty.

Gov. Arnold Schwarzenegger in California and Gov. David Paterson in New York delivered state of the state addresses that tried to strike upbeat notes for the future while acknowledging that they are in the midst of deep fiscal problems. In Kentucky, Gov. Steve Beshear said he would “refuse to use this recession as an excuse not to move forward.”

Legislative sessions got under way in other states, with lawmakers arriving at capitols in a more subdued mood than usual on account of the economy. In Nebraska, there was a call for a shortened session to save money.

The pain is being felt in most states as lawmakers begin sessions this month. The Center on Budget and Policy Priorities says state budget shortfalls are likely to reach a staggering $180 billion for the coming fiscal year — a crunch that means new tolls to fund road projects, more prisoners being released early to trim corrections budgets, and possibly the end of welfare programs in some states.

In his final State of the State speech, Schwarzenegger sought to look beyond his often-rocky tenure and tell lawmakers they must act boldly to reform the state’s tax and budgeting systems so future leaders do not find themselves in similar dire circumstances. He noted sweeping changes to the tax system recommended by a bipartisan commission last year.

He also outlined plans to train 140,000 workers and create 100,000 jobs in a state with an unemployment rate of more than 12 percent — but acknowledged the need for more cuts in the face of a $20 billion budget deficit.

In warning that the months ahead will not be easy, Schwarzenegger conceded that some areas of state government had been cut too far, pointing to K-12 and higher education. He said he would seek to protect education funding, calling it an embarrassment for California that the state spends far more on its prison system than on its universities. Prisons account for roughly 11 percent of general fund spending, compared to 7.5 percent for higher education.

“First, as bitter as the words are in my mouth, we face additional cuts. We know what that means. We know the pain it entails,” he told lawmakers packed into the Assembly chamber as his wife, first lady Maria Shriver, looked on. “What can we say at this point except the truth? That we have no choice.”

In New York, Paterson addressed budget deficits in his speech by proposing the merging of state agencies and public tracking of agency performance. He asked Lt. Gov. Richard Ravitch to take the lead on a four-year recovery plan, proposed a constitutional spending cap and promised to use his executive authority to veto or delay spending to keep the government solvent.

In a speech critical to improving his standing in the polls, the Democrat called for curbing the state’s overspending and for creating jobs, in part by renewing New York’s once-mighty manufacturing sector. Among his proposals is the acquisition and renewal of abandoned factories for sale back to the private sector.

Paterson also focused considerably on ethics reform. He said he would introduce ethics legislation to limit the influence of special interests and wants a new independent agency to enforce ethics laws. He proposed term limits for elected officials as well as requiring them to disclose their outside business ties.

“Outside influences and inside decay have bred cynicism and scorn in the people we represent,” the governor said, adding that he expected pushback against his proposals. “Prosperity hides all manner of sin, but no longer.”

Kentucky’s Gov. Beshear said that his top priority remained job creation and retention. His state has lost more than 113,000 jobs since the recession began two years ago, and has a jobless rate of 10.6 percent.

“In these troubled times, Kentuckians need hope and they need help,” he said.

In Nebraska, lawmakers began their legislative session mired in financial troubles, two months after they slashed $334 million from the two-year budget. Fewer bills than normal were expected to be introduced, and Gov. Dave Heineman even suggested it might be appropriate for lawmakers to cut the current session short to help save money.

The majority of state senators who responded to an annual, pre-session survey from The Associated Press said that more budget cuts may be in order during the session to help prepare for the next, two-year budget cycle that begins in mid-2011.

In Missouri, lawmakers convened their session also besieged by budget woes and perceptions of corruption. They pledged to clean up their image and keep government running without raising taxes. The challenges facing lawmakers contributed to a downbeat mood as the House and Senate each gaveled into session around noon.

Schwarzenegger’s pledge to avoid cuts in education drew praise from some lawmakers.

Democratic state Sen. Christine Kehoe said she appreciated the governor’s upbeat message and supported the idea of keeping education and higher education whole. But she worried about Schwarzenegger’s ability to follow through on his promise, saying his administration has been “short on results.”

California’s tax revenue is not expected to rebound for another three or four years. Even when it does, the boom-and-bust cycle will continue without sweeping reform, Schwarzenegger said.

“If I had hesitated to attempt something because it was too hard, I’d still be yodeling in Austria,” he said.

Associated Press writers Judy Lin and Tom Verdin in Sacramento; Michael Gormley and Michael Virtanen in Albany, N.Y.; Roger Alford in Frankfort, Ky.; David A. Lieb in Jefferson City, Mo.; and Nate Jenkins, in Lincoln, Neb contributed to this report.