Poor and working class communities, already hit hard by layoffs and shorter work hours from the recession, are about feel more pain as state and local governments cut health care, education, and other social services that our families need.

The recession has caused a large fall in state tax revenues. In April, taxes paid to state governments fell more than 20% from a year earlier. In addition, the falling stock market has forced some state and local governments to chip in more money to their employees' retirement funds. This drop in tax monies has led state governments to cut social programs and raise some taxes. Here in California, the projected budget deficit for the 2002-03 fiscal year is $25 billion, out of a total budget of $100 billion!

Currently, 43 states are experiencing budget shortfalls. The National Governors' Association estimates that state budget deficits will come in between $40 and $50 billion for fiscal year 2002. All this adds up to the deepest set of state budget crises in 20 years.

States are also in a bind because of the federal government policy of making them more responsible for the safety-net in terms of health care and welfare. During a recession, demand for these services increases (for example, there has been an increase in the welfare rolls for the first time in years), but states are faced with less tax revenues. Because states (unlike the federal government) must balance their budgets, it means cutting back on programs just when the need is greatest.

Some states, including Missouri and Massachusetts, have found their budget situation so bad that they have resorted to delaying payments for state tax refunds in order to conserve cash. The Oregon state legislature has made major cuts to their schools' budgets. California's “New Democrat” Governor Gray Davis is proposing to close the state budget gap by cutting health care for the poor, laying off state workers, shifting social service programs to county government and by borrowing monies from school districts and the tobacco lawsuit funds.

Minnesota has responded to its budget crisis by attacking social services and by Enron-type accounting practices – which means that a larger budget crisis will develop later this year. Illinois plans to attack public employees. The response of state governments to the budget shortfalls is simple. Politicians try to balance the budget on the backs of poor and working people. In this process, the hardest hit are the oppressed nationality communities.

The state budget crisis also threatens city and county governments, which receive much of their funding from the state. During the last recession in 1991, California balanced its budget mainly by cutting funds to counties, who are the providers of most social services. These local governments, as well as many non-profit social service agencies, are feeling a double whammy as their tax revenues and donations decline, even as demand for services increases.

Of course, if politicians were not in the pockets of big business, the budget deficits could be closed while continuing to fund, or even expand, needed social services. Here in California, consumer, community, and labor organizations, along with some local politicians, fought for an increase in taxes on high-income households. However, opposition from the democratic governor and republican legislators stopped this effort. Instead, the governor is supporting a small increase in sales taxes, as well as taxes on cigarettes and gasoline – both of which would not single those who can best afford to pay: the rich.

President Bush's “war on terrorism” and his big military build-up mean that the federal government budget skimps on spending for education and health care. This adds to the pressure on state and local budgets, which pay for almost all schooling. The feds could help by transferring funds to state and local governments. It would be best if the federal government cancelled last year's tax cut for the wealthy, cut back on the huge military build-up, or both. But even without asking this of politicians, the federal government could borrow more money and transfer the funds to state and local governments, since the federal government does not have a balanced budget requirement.

Right now, many politicians are trying to use the states' budget problems to position themselves for the upcoming elections in November. Here in California, the governor is threatening to stop welfare checks and funds for social services if republican legislators won't agree to his budget – hoping to blame them, and help his reelection campaign. City and county officials will also be faced with more cuts after state budgets are revised or passed this summer. Community organizations and labor unions need to get organized now to fight the program cuts that are coming down.

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