The House Finance Committee took up H.B. 20 on 3/20/02, a bill that would use $59.3 million from the state\’s Permanent Fund earnings reserve account to plug the budget shortfall. The last budget shortfall projection estimated a $1.1 billion shortfall for 2002-2003. In addition, Rep. Jim Whitaker (R-Fairbanks) recommended a 3% state sales tax, costing taxpayers between $300 million and $450 million annually. Gov. Tony Knowles introduced a state income tax that would cost taxpayers $360 million annually (Anchorage Daily News, 3/21/02).

Gov. Jane Hull announced plans to resolve the state\’s $988 million budget shortfall for 2003, including a 2.5% across-the-board cut to state agencies, a $118 million cut to so-called "soft capital" funds (for items like books, software, and vehicles), the absorption of various agency fund and budget surpluses, and revenue sources like new gaming facilities and contracts. "I guarantee you that there is something in this budget to make everyone mad," said Gov. Hull. Everyone, that is, except taxpayers (The Arizona Republic, 3/22/02).

State legislators may exhaust reserve funds and dip into Great Colorado Payback funds to balance this year\’s budget. In a memo released Wednesday, legislators detailed a plan to use those funds and to withhold funds from the Public Employees Retirement Association. Colorado legislators released the plan after learning that the state faces an additional $232 million shortfall, for a total of $1 billion less revenue than the originally projected $6.7 billion for the next two years. The state will have to cut $310 million from this year\’s spending and $500 million next year to balance the budget. Gov. Bill Owens doesn\’t favor tapping reserves or delaying retirement funds, and said that he prefers to cut spending first before considering other options (The Denver Post, 3/21/02).

Gov. Jeb Bush encouraged legislators in the House and Senate to work out budget difficulties in conference committee. Speaker of the House Tom Feeney and Senate President John McKay strongly disagree about McKay\’s proposal to decrease the sales tax from 6% to 4% and eliminate exemptions for services. Speaker Feeney and the rest of the House of Representatives maintain that the exemptions elimination will constitute an overall tax increase for consumers, even with the levy percentage decrease. An alternative proposed by members of the House would put a constitutional amendment on the November 2002 ballot, asking voters to approve a committee to examine tax exemptions. By a two-thirds vote of its members, the committee could broaden the sales tax to include services, as proposed by the Senate (St. Petersburg Times, 3/21/02).

House Democrats proposed increasing the state\’s alcohol and tobacco taxes, spending $100 million from the Hurricane Relief Fund, and a state spending increase of $90 million next year as part of an effort to pass next year\’s budget. House Republicans attacked the plan 3/20/02, calling the $3.56 billion proposed budget a major tax increase over the $3.47 billion originally allotted for next year. Gross state project grew by 35% from 1990 – 2000, while the state operating budget grew by 91% according to House Minority Leader Galen Fox (R-21). "What we see is a continuing picture of government growth as if something else was happening, as if our economy was growing, when it isn\’t," he said (The Honolulu Advertiser, 3/21/02).

The Senate passed a budget 3/20/02, 34-12, despite some Democratic opposition to implementing the last phase of the 10% income tax rollback and Republican support for greater spending cuts. At $21.6 billion, the budget will grow 1% next year, rather than the 3% recommended by Gov. Paris Glendening. Senator Christopher Van Hollen, Jr. (D-Montgomery), vice-chairman of the Senate Budget and Taxation Committee, voiced support for a 70 cent per-pack cigarette tax increase to compensate for the decrease in revenue collection that will result from the income tax rollback (Washington Post, 3/21/02).

The Senate Taxes Committee approved a bill to increase per-pack cigarette taxes by 30 cents after April 30, 2002, and another 30 cents after December 31, 2002. Thereafter, the tax would increase with the rate of inflation, costing taxpayers a total of $530 million by July 2005. At present, Minnesota levies a 48 cent per-pack tax on cigarettes. The new revenue would replenish reserve funds that were depleted to balance the state budget. Latest budget projections estimate a $1.4 billion spending shortfall for 2002-05. Senate colleagues rejected Senate Taxes Committee Chairman Larry Pogemiller\’s proposal to increase income taxes, a proposal that would have cost taxpayers $2 billion by 2005 (Minneapolis-St. Paul Star Tribune, 3/21/02).

Lawmakers trimmed $65 million from the state budget 3/21/02, but plans to increase taxes still circulate through the Legislature and the Governor\’s office. Numerous proposals to increase taxes include a 20 cent per-pack tax increase, a 50 cent per-pack tax increase (favored by Gov. Mike Johanns), a broadening of the state sales tax to include services, and the extension of state corporate income taxes to businesses without a legal nexis in the state. The current spending gap is approximately $119 million, after the $65 million in recent cuts and $42 million from cash reserves (Omaha World Herald, 3/22/02).

New Jersey
Despite his promises to voters during his 2001 Gubernatorial campaign that he would oppose tax increases, Gov. Jim McGreevey said 3/20/02 that he would consider closing tax "loopholes" to help balance the state budget. Since taking office, Gov. McGreevey has backpedaled on his promise to taxpayers by narrowing the specification of his no-tax-increase promise to include only sales and income taxes. But McGreevey has proposed increasing the per-pack tax on cigarettes by 50 cents, and raising taxes on businesses who are not located in New Jersey but who conduct business there. In total, the cigarette and corporate income tax increases will cost taxpayers $700 million next year if they are implemented. New Jersey faces a $6 billion spending shortfall for the 2003-04 budget year, the largest shortfall in the nation and nearly one quarter of the entire state budget (Newark Star-Ledger, 3/21/02).

A Tennessee lawsuit filed in 2000 alleges that sick smokers have just cause against tobacco companies, not the states where they live. Last year, lawmakers used $560 million from tobacco settlement funds to help balance the budget and this year many lawmakers recommend using another $102 million to soften the state\’s $450 million shortfall. But the lawsuit, filed in federal district court, will determine whether settlement funds may be used by Tennessee for purposes of alleviating budget woes, and could set an important precedent for other states (The Tennessean, 3/21/02).