Editorial: State Deficits

Budget deficits in Pennsylvania and New Jersey are growing larger, but officials in Harrisburg and Trenton can take comfort - at least they're not in New York.

New York Gov. David Paterson has given residents budget news that's beyond grim. The state is $15.4 billion in the hole, thanks to a combination of overspending, recession and Wall Street woes. The deficit represents about 25 percent of New York's general fund.

To close the gap, Paterson is proposing a whopping 88 new or increased taxes and fees. At a total of $4.6 billion, it would be the largest overall tax increase in the state's history.

Paterson wants to impose a 4 percent "iPod" tax on downloaded videos, music and pictures from the Internet. There would be a 4 percent tax on tickets to movies, concerts and sports events, as well as for rides in taxis, limos and buses. Personal services such as haircuts and pedicures would be subject to a 4 percent tax.

Paterson wants to impose higher taxes on clothing and beer. He even is calling for an 18-percent "obesity tax" on non-diet soft drinks.

And all of these "nuisance" taxes won't come even close to filling New York state's budget gap. The rest of the deficit would be closed by slashing services, including state aid to schools. Funding for hospitals would be cut drastically. Somehow, amid all of this taxing and cutting, Paterson's proposed budget would actually increase overall spending by about $1 billion. Talk about a tough sell - it makes no sense to impose extra pain on average folks while boosting spending.

The governor's plan also would allow wine to be sold in New York grocery stores. Perhaps Paterson feels his constituents will need a few swigs to get through this crisis.

Compared with New York, the budget shortfalls in Pennsylvania, New Jersey and Philadelphia seem not quite so catastrophic. But the deficits here are serious, and growing larger by the week.

Through November, tax collections in New Jersey were about 4.2 percent - or $459 million - below projections. Trenton is facing a deficit of at least $1.2 billion in the current fiscal year, and as much as $5 billion in fiscal 2010. That's after Gov. Corzine cut the state budget last year for the first time in memory. And a huge unfunded pension obligation still needs to be addressed.

In Harrisburg, Gov. Rendell is projecting a budget deficit of about $1.6 billion by next summer. He said he doesn't yet see the need for a general tax increase.

As if on cue, a legislative audit committee in Harrisburg said this week that about $200 million remains in slush funds controlled by Democratic and Republican leaders in the House and Senate. They should return the money. It was never theirs to begin with.

In the city, the Nutter administration needs to cover deficits of more than $1 billion over five years.

At least 43 states are grappling with shortfalls. More federal aid is likely on the way from the incoming Obama administration. But the continued recession and the prospect of a weak holiday shopping season, with lower sales-tax revenues, mean state officials will need to tighten belts even further.