'Red ink blues' echoes through America's statehouses

A swelling chorus of "red ink blue" is being heard in statehouse corridors across america. Austerity, rather than new spending programs, is becoming an increasingly familiar theme of 1981 inaugural and state-of-the-state messages by governors.

With few exceptions, the chief executives -- some of whom face early challenges to bring current budgets into line -- are warning of tough times ahead in balancing essential needs with available funds.

While most are shying away from suggesting higher state taxes, and some have even gone so far as to say they would veto any such legislation, at least a few have proposed or are readying tax boosting plans.

Gov. Vincent Atiyeh of Oregon, for example, has already set forth a $241 million program to raise taxes and fees. The measure, containing changes in personal income tax deductions and hikes in the corporate income, liquor, and cigarette taxes, would provide a projected 12 percent state revenue growth.

A strong pitch for support of the tax program is expected to be made by the governor in his annual message Jan. 13. Oregon, which like many other states has been hard hit by inflation and reduction in federal aid, held a special legislative session last fall to chop spending and head off a projected $200 million deficit in the fiscal year ending next June 30.

Ohio lawmakers, summoned back into session in mid-December by Gov. James Rhodes, pushed through a $396 million package of temporary tax boosts which, together with $100 million in spending cuts, is intended to head off an anticipated revenue shortfall in the current fiscal year.

The tax increases, scheduled to expire after six months, include a rise from 4 to 5 percent in the state limited sales tax, and hikes in business, liquor, and cigarette taxes.

This action came less than six weeks after Ohio voters overwhelmingly rejected an initiative petition to raise various taxes in order to bring in an additional $2 billion a year. Particularly hard hit by that measure would have been businesses and individual taxpayers in higher income brackets.

Ohio and Oregon are among nearly two dozen states faced with substantial revenue shortfalls during fiscal 1981 or 1982 -- unless spending levels are reduced or taxes increased.

States anticipating shortfalls include Arizona, $100 million to $200 million; connecticut, $185 million; michigan, $400 million; Minnesota, $195 million; New York, $224 million; Kentucky, $114 million; and Wisconsin, $154 million.

In New York, where the problem appears to have been resolved through spending cuts in recent weeks, aides of Gov. Hugh Carey are optimistic the $14 billion fiscal 1981 budget is now in balance.

Looking to the future, the Empire State governor has proposed the "austerity with hope" program, aimed at stimulating the New York economy. The program calls for $300 million in corporate and business tax decreases and $500 million reduction of the personal income tax burden, both spread over the next three years. also sought will be a "decreasing cap" on state spending with the lid eventually keyed to a proportion of total personal income in the state.

Unlike the federal government, most, if not all, states are required to have balanced budgets. For this reason the financial pinch on governors and state lawmakers may be especially hard.

Major causes behind the tight money situation facing most of the states is continuing inflation coupled with the lack of federal revenue-sharing dollars this year, explains Joseph McLaughlin, a spokesman for the Washington-based National Governor's Association.

"This is the third year in a row in which federal aid to state and local governments has dropped, in terms of real purchasing power," he points out, adding that never before in a time of recession has his happened. In every fiscal year since 1972 states have had this form of aid, he notes, adding that even where aid programs have been continued at previous level, the impact of the aid is less because of inflation.

Although they still hope that revenue sharing will return and other federal dollars will be available in future years, most governors appear resigned to having to cope with the immediate financial squeeze.

This, is some instances, will mean increased state funding to keep some needed programs hit by federal cutbacks, says Vermont gov. Richard A. Snelling.

"We must make that federal cutbacks will result in less waste and not in less moral concern," the outgoing president of the National Republican governors Conference emphasized in his Jan. 8 annual state-of-the-state message.

In neighboring New Hampshire, Gov. Hugh J. Gallen began his second term Jan. 8, renewing his pledge to keep the state the only one in the nation with neither a personal income tax nor a general sales tax. Governor Gallen emphasized making whatever economies were necessary to keep spending in line with revenues, rather than depend on new or increased taxes.

Newly installed Gov. William A. O'Neill of connecticut has proposed that some terminated to compensate for the projected loss of $22 million in revenue sharing. Even with the suggested local assistance cutbacks, communities around the state would still receive some $560 million in other forms of local aid from Hartford.

In Michigan, Gov. william Milliken is readying a Jan. 15 message which will emphasize both state fiscal belt-tightening and increased municipal property tax relief, according to an aide.

michigan, which has been particularly hard hit by unemployment, now standing at 12.1 percent, has been forced to reduce spending by $1 billion over the past year to keep accounts in balance.

Wisconsin Gov. Lee sherman Dreyfus is expected to recommend renewal of the fiscal 1981 4.4 percent state spending cut into fiscal 1982 as a way of wiping out the rest of the 1981 deficit, which is approaching $240 million.

Except for oil-rich alaska, few states can be considered even close to a comfortable financial position. California, for example, which had a $6 billion surplus when Proposition 13 was approved in June 1978, now has a projected nest egg of but $300 million, which is less than 1 percent of total annual s tates spending for general purposes.