Thanks to the results on a handful of key ballot measures, legislatures are going to have an even tougher time than they anticipated balancing state budgets in some states.
Arizona: The rejection of Propositions 301 and 302 mean that a budget deficit estimated at $825 million back in September is now something more like $1.3 billion.
California: The combined fiscal impact of the passage of Props. 22 and 26 is a negative $2 billion, and Prop. 26 will make it more difficult for the legislature to increase regulatory fees starting next year.
Florida: Voters refused to go along with the legislature's idea to modify class size requirements. Approved by voters back in 2002 as an amendment to the state's constitution, Florida's limits on the size of classes for K-12 schools is expected to cost the state as much as $40 billion to implement over the next decade. The state had budgeted $2.9 billion for the 2010-2011 fiscal year for this program.
Missouri: With the approval of Proposition A, cities in Missouri are now prohibited from implementing an earnings tax. In the two cities that already have one -- Kansas City and St. Louis -- voters will have to approve the continuation of that tax in another vote in 2011. If they reject their earnings tax, it will be phased out over 10 years and can never be re-implemented. If they vote to continue it, similar votes must come every five years thereafter. In Kansas City, MO, the earnings tax generates just under $200 million, which is about 40% of the city's budget. In St. Louis, it generates about $140 million, or one-third of the city's budget.
Oregon: Voters approved Measure 73, a mandatory minimum sentencing law for sex offenders and drunken drivers. It's estimated that it will cost $1.4 million in the first year, growing to $29.1 million in the fourth year. Measure 73 did not provide for a new revenue stream to fund its costs.
Washington: Voters gave the budget a double wallop with the passage of Initiatives 1053 and 1107. Passing I-1107 means that tax increases passed by the legislature in 2009 are repealed, a loss of $352 million to the state budget and $83 million to local governments over the next five years. I-1053 returns the legislature to a 2/3 vote requirement to pass tax increases during the 2011 session, meaning the process of balancing the budget next year will be more difficult than it would have been had the simple majority requirement stayed in effect through next July.
Better news: Legislatures in Colorado and Massachusetts got somewhat better news about the budget-balancing task ahead of them: Colorado voters rejected a trio of initiatives that would have resulted in the state spending an estimated 99% of its general fund on K-12 education by the time the three were fully implemented in a decade or so. Massachusetts voters rejected an initiative that would have cut the state sales tax rate by more than half, costing the state an estimated $2.5 billion annually.