In tough economy, states get creative

In his budget proposal to the Legislature last week, he promised $17 million in revenue from it. He also wants to require Internet giants such as Amazon.com to collect tax on an estimated $47 million in sales to New Yorkers, who are now on an honor system to report on their tax returns how much they spend online.

Three recent reports predicted states will feel the pinch of the economic downturn. Nearly half are projecting a budget shortfall within the next two years.

A few states such as Maryland still raise money the old-fashioned way — by increasing broad-based taxes. Maryland raised taxes by $1.4 billion in November, but it is also considering legalizing slot machines to pay for health care.

New York's fiscal year starts April 1, and typically deals with such problems ahead of most states, where the budget goes into effect on July 1.

New York also has a tradition of some of the most outlandish schemes. In 1991, the Legislature famously approved the "sale" of Attica prison to a state authority for $242 million that was then used to help balance the budget. The state was left with a total mortgage of more than $450 million including some of the original debt on a prison it had already paid to build.

Now another idea is for New York to lease its lottery, presumably to a Wall Street investor, in return for an upfront payment of $4 billion, $200 million a year in interest and a continuation of the $2.1 billion the lottery now generates for education.

"There's an incredible desire to avoid general sales and income taxes," said Scott Pattison of the National Association of State Budget Officers. "And when you think about it, states own a lot of assets. So if you are turning them over to private companies to lease and manage for a while, and get upfront money, you have a lot of options."

In New Jersey, officials are weighing reforms to the highway system that could allow a nonprofit corporation to operate toll roads. The agency could also raise money by putting solar panels on sound barriers, erecting windmills along the roadways and selling naming rights for rest stops.

That could mean New Jersey Turnpike rest stops now named for famous residents such as Thomas Edison, Walt Whitman and Red Cross founder Clara Barton could be renamed for corporations.

"It's the idea that you can get away with raising taxes as long as you don't say the word 'tax,'" said New York Assemblyman Richard Brodsky, a Democrat who represents affluent suburbs north of New York City. "And the consequences are disastrous for the average middle class or poor people, and a boon to big business and the wealthy."

"Call it what you want," he said. "People are paying more."

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