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Budget Issues Dominate State Races
by Maureen Sirhal
Budget deficits are the major issue dominating state elections in 2002, and they also are the issue of import to high-tech communities nationwide.
A record number of states face massive budget deficits exceeding $50 billion, according to the National Conference of State Legislatures. The shortfalls could drastically impact everything from tax rates to education funding.
For the high-tech industry, state elections vary region to region. In California for instance, redistricting ensured that many Democratic candidates would prevail in certain areas, so incumbent lawmakers faced their toughest opponents in the primary. "Seems like most of the races were decided in the March primary," said Roxanne Gould, vice president of state relations for AeA, a high-tech trade group.
A few races may spark active participation from technology or telecommunications interests. But most technology trade groups say they are eyeing candidates who support a general pro-business agenda and not necessarily issues specific to the tech industry. Several states also are considering referendums and ballot initiatives in November that will impact areas of keen concern to high-tech companies, such as education.
This column examines the electoral scene in three states.
Virginia
Without an election for governor or state legislators on the ballot, Virginia technology groups are focused on two major ballot initiatives: a referendum that would raise taxes for transportation projects in northern Virginia, and a bond referendum for higher education.
The transportation initiative would raise the state sales tax from 4.5 cents per dollar to 5 cents in northern Virginia, earning an estimated $5 billion over 20 years for two-dozen road and transit improvements. The revenue also would go toward expanded capacity for commuter trains and bus systems.
"That's really arisen as one of the top priorities in the region," said Josh Levi, director of policy for the Northern Virginia Technology Council (NVTC). For tech firms, it is an issue tied to the quality of life for employees, he said, because with growing congestion in the region, companies often face a tough time recruiting skilled workers.
The proposed bond issue for educational facilities would provide $900 million for infrastructure improvements to the state's universities and community colleges. The money would go toward renovating or refurbishing research facilities and expanding the space in dorms and other buildings. Tech-focused schools like George Mason University stand to benefit from the funding.
Tech trade groups favoring the initiatives are focusing on voter education and efforts to bolster voter turnout among the employees of member companies. NVTC, for example, has been offering absentee voter ballots at its events.
Pennsylvania
The budgets deficit is center stage in Pennsylvania, where a shortfall in tax revenue could induce some lawmakers into delaying planned tax cuts or even raising taxes to cover government costs.
With no ballot measures before state voters, high-tech players are keeping tabs on the state's gubernatorial race. Former Philadelphia Mayor Ed Rendell is the Democrat running against Republican state Attorney General Michael Fisher for the open governor's seat.
Before his departure as the state's governor last year to head the new White House Office of Homeland Security, Tom Ridge began an effort to eliminate a tax on the capital assets of state companies. Facing a slumping economy, the priority for most businesses, and particularly technology firms, is to preserve that effort. But firms also want tax rates to remain stable in the wake of a state deficit of more than $600 million.
While tech interests are not getting involved in specific races, they are eyeing candidates who appear willing to promote pro-business principles. Both Rendell and Fisher are "closely aligned in terms of business," Brian Kennedy of the Pittsburgh Tech Council said.
But Fisher and state Republican candidates also are pushing for reform in property tax rates. Just this week, Fisher proposed placing a referendum on the May 2003 ballot to force school districts to ask voters whether they want to keep the current property-tax system or reduce property taxes -- which finance schools -- and shift to an earned income tax.
Rendell, meanwhile, wants to reduce business taxes and invest more than $1 billion in bonds and federal dollars to attract private capital investment to the state.
Kennedy noted that within the last 18 months, there has been a growing trend among state tech firms soliciting donations and support. A lot of that is the result of Pennsylvania's focus on technology, experts said.
Massachusetts
The high-tech community is tracking two state referendums before Bay State voters that would impact education and income taxation.
The first ballot issue calls for abolishing the state income tax. The plan would cost Massachusetts $7 billion of its $23 billion state budget, but proponents say the move would give state residents relief from the state's high cost of living.
While many in the tech community favor lowering the tax burden on their employees, some groups argue that eliminating the tax would go too far. Members of the Massachusetts High-Tech Council generally do not support income-tax elimination.
The second ballot issue would require that all elementary school students be taught in English. The proposal aims to better integrate immigrants within schools, an issue that advocates say would help public schools become more efficient.
For tech firms, the issue is related to workforce development. According to informal polls taken early in the year, members of the Massachusetts High-Tech Council support the measure, spokesman Cort Boulanger said. "It's an issue going forward that will make our school system stronger," he said.
State firms also are tracking the gubernatorial race between Republican Mitt Romney, a former venture capitalist, and Democrat Shannon O'Brien, currently the state treasurer. The two candidates are seeking the open seat being vacated by Gov. Jane Swift.
Tech firms suffering through the slow economic times are focused on the candidates' tax views and their general attitudes toward business issues. Both candidates are making state budget and tax policies, as well as traffic congestion, issues in the election. Romney and O'Brien have sparred over whether they will increase taxes to balance the budget. Romney has pledged to repeal a $1.2 billion tax increase that legislators passed earlier to plug the state's budget gap.
Both candidates also have addressed traffic problems, suggesting ways to improve commuter conditions in urban areas like Boston. O'Brien told The Boston Globe that she would "steer" firms like Cisco Systems, which has an office in Massachusetts, to settle in urban areas or regions where the transportation infrastructure is stronger. Romney has suggested soliciting contributions from companies that choose to locate in rural locations.
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