District Council 31 of the American Federation of State, County and Municipal Workers is part of a coalition that has so far blunted Illinois Gov. George Ryan’s attempt to ram $500 million in budget cuts through the state legislature. Illinois is one of 39 states faced with declining revenues and the need for increased spending.

Marrianne McMullen, District Council 31 public affairs director, said the coalition is fighting a “whole series of cuts” that will mean the loss of essential social services to the physically and mentally disabled.

Other proposals to save money include privatizing dietary and commissary facilities at correctional and state mental health institutions.

“We can’t let him destroy good-paying jobs and replace them with non-union contractors,” McMullen said.

Although there are ways to save money, a partial solution to the crisis lies in closing loopholes in the state’s tax system, she said.

“We lose half a billion dollars each year because of these exemptions. But we need longer-range solutions that can only be provided by the federal government. That’s why we support a stimulus plan that gives money to the states to provide increased unemployment benefits and medical care.”

Nor is Illinois an exception to the rule. The Center for Budget Policy and Priorities warns that states face a combined shortfall of as much as $50 billion because of a continued decline in the economy, increased spending for health care and unanticipated costs associated with the events of Sept. 11.

The National Conference of State Legislatures said revenue is below forecasts in 43 states and spending is above budget in 19 states. This deficit, equal to 10 percent of all state budgets, is greater than the shortfall experienced during the recession of the early 1990s when it reached 6.5 percent of state budgets.

Since states are prohibited from running budget deficits, the present crisis has brought with it threatened cuts in social programs. In most states Medicaid, the federal-state program that provides medical care for more than 40 million poor people, tops the list of intended cuts.

In a telephone interview, Joan Alker, a spokesperson for Families, USA, warned that “the worst is yet to come” when it comes to funding for Medicaid and tougher eligibility requirements.

“States have authority to levy co-pays for doctor visits,” she said. “While in most cases they are in the $1-$5 range, states can ask the federal government for waivers to allow higher rates.”

She said states can also impose a co-pay when a person is admitted to a hospital. “In Utah it costs $100.”

While it is true that the recent 9-percent increase in welfare rolls, made worse by an explosive growth in the number of unemployed workers who have exhausted their benefits, has contributed to the budget crunch, skyrocketing increases in the cost of medical care have been the biggest factor in recent years.

Within that, an increase of 20 percent or more in the price of prescription drugs has been the driving force behind the 11 percent increase in state spending for Medicaid.

Officials in Indiana expect prescription drug prices to increase by 40 percent in the next two years.

Although much of the state budget crisis is attributable to national problems, tax cuts enacted by many states during the relatively prosperous years of the late 1990s made the situation even worse.

These cuts have not only dried up revenue sources, they have shifted an even larger part of the tax burden to lower-income families.

Of the some $35 billion in state tax cuts enacted between 1994 and 2001, only about 3 percent were reductions in sales and excise taxes, which typically provide one-half of all state revenue.

In recent years, lawmakers raided unemployment trust funds in many states, giving employers billions of dollars in tax breaks. Georgia legislators went further than most when they suspended tax payments into the fund. Thousands of unemployed Georgians now face the possibility that additional eligibility restrictions will be imposed on benefits that average a little over $200 per week and where fewer than 33 percent of the state’s 170,000 unemployed workers draw benefits.


Fred Gaboury
Fred Gaboury

Fred Gaboury was a member of the Editorial Board of the print edition of  People’s Weekly World/Nuestro Mundo and wrote frequently on economic, labor and political issues. Gaboury died in 2004. Here is a small selection of Fred’s significant writings: Eight days in May Birmingham and the struggle for civil rights; Remembering the Rev. James Orange; Memphis 1968: We remember; June 19, 1953: The murder of the Rosenbergs; World Bank and International Monetary Fund strangle economies of Third World countries