Rookie governors facing unhappy new year

Image: Brian Sandoval, Kathleen Sandoval, Michael Douglas
Nevada Gov. Brian Sandoval takes the oath of office from state Supreme Court Chief Justice Michael Douglas Monday in Carson City. First Lady Kathleen Sandoval is at right.Cathleen Allison / AP

For the nation’s 29 new governors, inauguration day may feel like having a brutal hangover.

And that's even while the cork is being popped on the celebratory bottle of champagne.

This week, 11 states — including California, Florida and Nevada — will swear in their new chief executives. The rest of the new governors take their oaths next week or the week after.

Revenues below pre-recession heights
The rookie governors — and veteran incumbents too — are facing a year filled with ugly and divisive choices as they try to balance the books at a time when revenues are below their pre-recession heights.

The money flowing into state coffers has decreased by nearly 12 percent in the last two years, according to the National Association of State Budget Officers. By one estimate, states confront budget deficits of nearly $27 billion this fiscal year and a cumulative gap three times bigger than that in fiscal year 2012.

Another challenge for governors aiming to slice costs from their state budgets: there may not be much fat left to cut. Over the past two years, state lawmakers have already eliminated much of what they saw as expendable, closing budget gaps totaling nearly $84 billion in FY 2011 alone.

There are some encouraging signs of economic revival. The Census said last week that state and local government revenues in the third quarter of 2010 increased by 5.2 percent compared with third quarter of 2009 — the fourth consecutive quarter of revenue growth.

But, while revenues may be inching upward, so are costs. The National Conference of State Legislatures (NCSL) warned in a recent report that increased state revenues are “unlikely to be sufficient” to offset the increasing costs of state programs like Medicaid and public education.

A nd incoming money from the federal government in the form of Recovery Act funds is also drying up. With the ending of the federal stimulus program, states will have nearly $40 billion less in federal funds at their disposal in FY 2012 than they had in FY 2011.

Medicaid funds diminished
One crucial provision in the stimulus was increased funding of Medicaid. That enhanced funding ends for most states on June 30.

Due to the recession and workers losing their jobs and their health insurance, states are now carrying huge Medicaid case loads. After June they must carry them with less federal support.

At his swearing-in Tuesday, Florida's new governor, Republican Rick Scott, stressed job creation at all costs as his priority.

"We will not allow excessive law suits to strangle job creation. And we will not allow a small group of predatory lawyers to stalk the business community in search of deep pockets," he declared.

"We have to do tort reform. As I explained to (Texas Governor) Rick Perry, whatever they do in Texas, we're going to do better." He added, "No special interests can be allowed to triumph over the goal of full employment."

Using a metaphor appropriate for his state, Nevada’s new governor on Monday compared the causes of his statehouse's challenges to an economic earthquake.

“We live in a time when the odds seem to be against us,” said incoming chief executive Republican Brian Sandoval in his inaugural address Monday. “The earth has shifted beneath our feet. The old rules no longer apply in a new global economy. And for some, the results have been disastrous.”

While avoiding specific proposals for spending cuts or tax increases, Sandoval tried to rally the people of his state by citing two adages: “character is measured in times of crisis” and “optimism is the foundation of courage.” And he said, “Rarely has our state been so in need of courage.”

New York Gov. Andrew Cuomo, a Democrat and the son of former New York Gov. Mario Cuomo, spoke for other governors Saturday when he said in his inaugural address in Albany, “This is an austere setting. And it should be ... No grand celebrations. There’s a lot of disappointment vis-à-vis the government. There’s a lot of suffering from the economy.”

Brown's “painful ... but honest” budget
During his inauguration Monday in Sacramento, Calif., Democratic Gov. Jerry Brown offered a sober assessment of the fiscal moves necessary to dig California out of its deep shortfall.

“The budget I present next week will be painful,” said Brown, who took office for the third time after serving two terms in the 1970s. “But it will be an honest budget.”

Brown lamented a lack of bipartisan solutions to the state's economic problems, saying that the two parties “can’t come close to agreeing on what the right path forward is.”

The budget shortfall is due, Brown added, to “far more than waste and inefficiency” in government.

“Yes, government wastes money ... but government also pays for things that people want,” he added, things such as parks, prisons, hospitals, and universities.

California’s short-term finances are looking better. State Controller John Chiang said that revenues for the month of November were 19 percent above the target estimates in the state budget.

“Barring an unexpected drop in revenues or surge in state payments, we do not face an immediate cash crisis this fiscal year,” said Chiang. “But without an honest, on-time budget, we could see a multi-billion dollar cash problem in the summer of 2011.”

New Yorkers 'imprisoned in their homes'
In New York, Cuomo is contending with a budget gap that the NCSL estimates at more than $9 billion. New York will lose more than $5 billion in federal stimulus funds, and tax increases enacted over the last two years will expire during the next three years.

The new governor offered a bleak prognosis.

Young people in upstate New York “are leaving because they believe there is no economic future left,” he said.

In his address, Cuomo also called for a cap on property taxes, saying that many homeowners “are imprisoned in their homes” because they can no longer afford to pay the fees or sell their houses in the face of plummeting property values.

In a striking comment for a Democratic governor, Cuomo said “the state government has grown too large, we can’t afford it ... .”

“This state has no future if it is going to be the tax capital of the nation,” he said.