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Life In These Money-Strapped States
by Maureen Sirhal
As state leaders continue to endure one of the worst budget crises in more than a half-century, they have warned consumers and businesses of potential tax increases and spending cuts. But several technology industry groups see some bright spots amid the budgetary bloodletting.
Much of the attention so far has focused on California, where Gov. Gray Davis announced that he would seek a 1 percent increase in California's sales tax and a hike in the personal-income tax to help address a $35 billion deficit. In total, he is seeking roughly $8.2 billion in tax hikes.
But a major portion of Davis's plans hinge on spending reductions that would impact procurement of technologies and economic development, particularly in the high-tech sector. The state Technology Trade and Commerce Agency, for example, will lose $6.5 million in funding for the California Technology Investment Partnership Program, the Manufacturing Technology Program and the Space Technology Alliance Program. Another $3.4 million will be trimmed from programs designed to spur foreign trade and investment by promoting exports.
Some states also aim to consolidate management of their information technology to stop redundancy and save money. Gov. Mark Warner of Virginia last week said budget constraints have forced state officials to make hard choices in funding certain projects, and he cited IT spending as one area where potential savings could be realized by restructuring the way Virginia buys and manages its technology systems. The predicted savings: $100 million.
In neighboring West Virginia, meanwhile, Gov. Bob Wise has recommended the consolidation of two state agencies: the Office of Technology and the Office of Information Services and Communications. "We spend millions on technology, and it's simply not coordinated as well as it should be," he said in last week's State of the State address.
Silver Lining In The Budgetary Cloud?
Some observers in the technology industry still contend that the situation is not as bad as it could be. First, not all states are looking to balance their budgets on the backs of businesses. Leaders in West Virginia, Virginia and New Hampshire leaders are not planning general tax hikes on businesses, and in California, Davis plans to extend a tax credit on manufacturing equipment.
The talk of tax hikes also has focused state lawmakers' attention on the need for overhauling their tax codes and re-allocating tax incentives to match the current economic situations.
Josh Levi, vice president of government affairs at the Northern Virginia Technology Council, said Virginia clearly "does not have very much money. Everything at this point is focused on solving the budget shortfall. That being the case, a lot of what is being discussed is focused on the setting the table for future."
He added that the solutions that lawmakers are seeking to solve the revenue shortfall have created an opportunity for restructuring Virginia's tax systems. That is the "single-largest thing" lawmakers could do to aid the tech industry, Levi said.
Davis stressed his desire for a similar restructuring approach in California in an effort to avoid the "boom-bust" cycle of tax revenues that are tied to income changes. "Our current fiscal structure has not been updated in 25 years to reflect either our changing economy or demographics," Davis said in State of the State speech last week. "It's high time to free ourselves of this boom-bust syndrome. ... And I will not sign a budget without substantial structural reform."
Other states are looking to the fiscal crises as political capital to overhaul other government services and functions to the benefit of businesses and citizens. "We can use that crisis to change government so it can be value based for citizens," New Hampshire Gov. Craig Benson argued in his inaugural address.
Less Regulation, More Federal Money
Some leaders also are aiming to spur job growth by reducing regulatory burdens on businesses. New Jersey Gov. James McGreevy, for example, said he plans to concentrate efforts on revising rules that prevent businesses from locating in the state. "We're going to reform regulations that are driving companies out of New Jersey so we have more competition, not less," he said.
Washington Gov. Gary Locke also is making regulatory reductions as part of a five-point plan to increase job growth in the state.
States also hope the emphasis on homeland security will help them leverage their own security expertise to attract business and spur a mild economic recovery. Davis for one said he plans to make permanent California's Office of Homeland Security. And many state lawmakers may visit Washington this year to stump for more federal grants on homeland security.
Virginia's Center for Innovative Technology, a state-sponsored incubator, plans to seed more research and help commercialize technologies for security purposes. Industry experts said the move could help companies tap into federal homeland security spending over the next few years. Virginia also may become the base for the new Homeland Security Department.
"I guess we are cautiously optimistic," Roxanne Gould, vice president for California public and legislative affairs at technology trade group AeA, said of the outlook in the states.
Still, she warned that most of the budget proposals presented by governors must be approved by state legislators, many of whom want to retain social programs that were expanded during the boom period and favor increased taxes on businesses to help achieve that goal. Many lawmakers "are talking about businesses having to take a hit," she said. "I am not sure business can sustain the kind of hits I am hearing may be imposed on them."
Investing For The Long Term
The Corporation for Enterprise Development (CFED) has released its latest Development Report Card of the States, an annual survey measuring state economic performance, business vitality and development capacity.
The report reveals that states that invest resources for long-term growth outperform states that operate with a short-term mentality. As states confront budget deficits, the report recommends that new initiatives to boost the economy should be focused on creating long-term prosperity. Meanwhile the report highlights effective state strategies for increasing development. Top performers include: Colorado, Connecticut, Massachusetts, Minnesota and Virginia.
Utah To Eliminate Job Of 'Porn Czar'
Fiscal hardships have forced Utah to eliminate the job of state "porn czar." AP reported this week that Paula Houston, whose official title is obscenity and pornography complaints ombudsman, will be out of a job April 1.
As a member of the state attorney general's office, Houston has focused solely on combating pornography in a post created two years ago. Houston's office often counseled parents and businesses on how to fight unsolicited e-mail promoting pornography.
"I think it's really important that thousands of people called for information," Houston told AP. "People want to protect their kids. This is a huge issue that's growing daily, and it's not going away."
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