While much attention over the past several weeks has been focussed on California's gubernatorial recall election, voters in the southern state of Alabama recently cast ballots on a less-publicized matter, but one of national significance as well. Unlike California, where the state's Democratic governor is in trouble rooted in budget problems, in Alabama it is the Republican governor who got into political difficulty. He asked voters to help end a fiscal crisis, by approving the largest tax increase in state history. Their response: a loud "no!"

The sluggish U.S. economy has meant sharply reduced revenue for state governments. With ballooning budget deficits elected officials in about two dozen states are studying how to restructure their tax systems. In Texas, for example, Republican Governor Rick Perry plans to call a special legislative session to deal with fiscal problems. In Pennsylvania, Democratic Governor Ed Rendell wants to raise income taxes in exchange for lowering property taxes and an overhaul of the tax system.

Alabama is being viewed as a test case, after Governor Bob Riley put the question to voters. The recently elected Republican governor told constituents that Alabama cannot pay its bills. This year, Alabama's budget shortfall is estimated at $675 million.

He called the situation "desperate." "The problem is what we've been doing over the past years is anticipating three, four, five percent growth, and it didn't materialize. So now all of those bills are now due," he said.

Governor Riley took a political gamble, which divided Alabama's conservative Republican Party. Mr. Riley, who promised to oppose taxes when he ran for office, now asked voters for $1.2 billion in new taxes, the largest tax increase in state history. The backlash was swift. Political advertisements flooded the airwaves. One said, "The big utilities get a tax break while legislatures fatten their slush fund. Voters ought to teach them a lesson. Vote no on the Riley tax increase."

The governor fought hard to persuade Alabamans. He campaigned across the state and on radio and television shows for its passage. Mr. Riley hoped the proposal would appeal to voters, in part because it contained government reform measures, too. "There are so many interests down here they really don't want reform. They don't want the level of transparency that you would have after this vote," he said.

The governor warned thousands of teachers and state workers would lose their jobs and as many as 5,000 or 6,000 criminals would have to be released from prison, unless the tax increase was approved. The governor said cuts in the general fund would devastate law enforcement and the state's court system. He added the situation would get worse in fiscal year 2004 and 2005.

Turn-out was very heavy September 9, the day of the vote. And by a two-to-one margin, voters sent a clear message: Alabama's government must live within its means. The critics argued that the government was guilty of waste and abuse and the voters agreed, rejecting the tax increase.

The governor responded with a pledge to find other ways to close the budget gap. "We're going to open this up," he said. "We're going to shine a light on every tax dollar that comes into this state. We're going to have the most transparent government this state has ever seen. And that starts tomorrow."

A special session of lawmakers was called. Their task: to cut $77 million from the budget. The Alabama house and senate passed a budget resulting in layoffs throughout state government and the early release of thousands of prisoners. School children will not be given new school books. The governor predicts next year's budget will be even worse.

Governors around the country have watched what has happened in Alabama. Some two dozen states are considering ways to restructure their tax systems. But political observers believe trying to raise taxes, in the wake of the Alabama vote, is a much less attractive option.

John Giles, president of the Christian Coalition in Alabama, opposed the tax increase. He summed up what he believes the voters were telling their state representatives in the Alabama capital, Montgomery. "I think what you are going to find here is that the message from the people of Alabama to Montgomery is that we as Alabama families must live within our means," he said. "Montgomery must live within its means."

Lawmakers across the United States are hearing a similar message.