The states where the fiscal year does not end June 30 are Alabama, Michigan, New York and Texas.
Even with the stimulus funds, political leaders in at least 19 states are still struggling to negotiate budgets, which has incited more than the usual drama and spite. Governors and legislators of the same party are finding themselves at bitter odds: in Arizona, Gov. Jan Brewer, a Republican, sued the Republican-controlled Legislature earlier this month after it refused to send her its budget plan in hopes that she would run out of time to veto it.
In Illinois, the Democratic-led legislature is fighting a plan by Gov. Patrick J. Quinn, also a Democrat, to balance the new budget by raising income taxes. And in Massachusetts, Gov. Deval Patrick, a Democrat, has threatened to veto a 25 percent increase in the state sales tax that Democratic legislative leaders say is crucial to help close a $1.5 billion deficit in the new fiscal year.
“Legislators have never dealt with a recession as precipitous and rapid as this one,” said Susan K. Urahn, managing director of the Pew Center on the States. “They’re faced with some of the toughest decisions legislators ever have to make, for both political and economic reasons, so it’s not surprising that the environment has become very tense.”
In all, states will face a $121 billion budget gap in the coming fiscal year, according to a recent report by the National Conference of State Legislatures, compared with $102.4 billion for this fiscal year.
The recession has also proved politically damaging for a number of governors, not least Jon Corzine of New Jersey, whose Republican opponent in this year’s race for governor has tried to make inroads by blaming the state’s economic woes on him. Mr. Schwarzenegger, who sailed into office on a wave of popularity in 2003, will leave in 2011 — barred by term limits from running again — under the cloud of the nation’s worst budget crisis. And the bleak economy has played a major role in the waning popularity of Gov. David A. Paterson of New York.
Over all, personal income tax collections are down by about 6.6 percent compared with last year, according to a survey by Mr. Pattison’s group and the National Governors Association. Sales tax collections are down by 3.2 percent, the survey found, and corporate income tax revenues by 15.2 percent. (Although New Jersey announced last week that a tax amnesty program had brought in an unexpected $400 million — a windfall that caused lawmakers to reconsider some of the deeper cuts in a $28.6 billion budget they were set to approve in advance of the July 1 deadline.)
As a result, governors have recommended increasing taxes and fees by some $24 billion for the coming fiscal year, the survey found. This is on top of more than $726 million they sought in new revenues this year.
The proposals include increases in personal income tax rates — Gov. Edward G. Rendell of Pennsylvania has proposed raising the state’s income tax by more than 16 percent, to 3.57 percent from 3.07 percent, for three years — and tax increases on myriad consumer goods.
“They have done a fair amount of cutting and will probably do some more,” said Ray Scheppach, executive director of the governors association. “But as they look out over the next two or three years, they are also aware that when this federal money stops coming, there is going to be a cliff out there.”
Raising revenues is the surest way to ensure financial stability after the stimulus money disappears, Mr. Scheppach added, saying, “You’re better off to take all the heat at once and do it in one package that gets you through the next two, three or four years.”