Residents of five states with fiscal challenges would rather lawmakers continue to cut spending or raise taxes than borrow to cover short-term budget deficits, according to a report issued Tuesday by the Pew Center on the States and the Public Policy Institute of California.
The residents of Arizona, California, Florida, Illinois and New York, surveyed in June, also showed a distaste for government spending and support for higher taxes to sustain education and health programs.
The survey found that residents preferred their states to tax corporations, the wealthy, smokers, drinkers, and gamblers rather than themselves.
A large majority of people said they wanted their state government to reform their budget process now, instead of waiting for the economy to improve, according to the report.
At least 1,000 residents were surveyed in each of the states.
The five states together account for almost a third of U.S. economic output and population, but carry almost half of this year’s projected budget gaps for all states. They have estimated second-quarter unemployment figures ranging from 8.3% in New York to 12.4% in California.
If lawmakers cannot cut spending or raise taxes, then residents would begrudgingly choose to borrow funds. But only 5% to 11% of those surveyed in all five states said borrowing is their first choice to balance the state budget. Arizona and Illinois residents were least likely to support borrowing.
The “widespread antipathy” that showed up in the survey indicated that states are “caught in a broader net of national concern about debt,” stemming from household debt problems and fears about the federal deficit, the report said.
Debt issuance has picked up during in the past year, despite the apparent lack of support for government borrowing, the report found.
Outstanding debt for state and local governments was more than $2.3 trillion last year, it said, noting that debt provides a way for states to pay for infrastructure, services, and other long-term investments.
“Borrowing is an important financial tool for state governments,” said Mark Baldassare, president and chief executive officer of the Public Policy Institute of California.
“Where borrowing becomes problematic, of course … is when you have a large proportion of your current expenditures being covered by borrowing.”
The five states included in the survey held a total of $919.5 billion of outstanding debt in 2008, and they all have maintained investment-grade ratings, the report noted.
The survey suggests that some public expectations “clash with reality” and are contradictory to actual circumstances, said Susan Urahn, managing director of the Pew Center on the States.
Most people, for example, were concerned about the effect of spending cuts on public services and wanted to protect K-12 education and Medicaid programs.
However, they also said spending cuts would be their first choice for balancing a state budget.
In addition, residents believed that budget-balancing revenues could come from corporate taxes and so-called sin taxes, while those revenues alone would fail to close budget gaps, the survey found.
This could force new lawmakers — including new governors expected to be elected in at least half of states for the coming year — to “engage with the public” and cultivate support for “painful decisions that may be required,” Urahn said.
