Out of Control Policy Blog

State Fiscal Crisis in Perspective

Stateline.org offers an updated snapshot of the state fiscal crisis—or more accurately, the profileration of dozens of state fiscal crises—in this helpful article:

This year’s state legislative session will go down as one of the most brutal in recent memory as the national recession forced lawmakers to find money to cover a staggering $215 billion in estimated budget gaps for 2009 and 2010 — the equivalent of more than $700 for every man, woman and child in the country.

Even with the federal stimulus package dumping billions of dollars into the states, California, Kentucky, Nevada, New York and Washington are among states that struggled with the largest deficits in modern history. California, by far, faced the biggest challenge — a whopping $26 billion gap — that forced the state to slash $15 billion in basic services, including program funds for K-12 education and health care for the poor, and to divert some $4 billion from local jurisdictions. [...]

While most statehouses have shuttered their doors for the year, newly emerging budget shortfalls caused by less-than-anticipated revenues will force many legislatures to reconvene to balance their budgets as required by law. The question is just how big the new holes will be. At least half the states already are running in the red less than a month after their new budgets began July 1. Arizona, Connecticut and Pennsylvania could not agree on a 2010 budget plan by July 1 and are still working to complete them. Michigan, the only state that begins its fiscal year Oct. 1, also is trying to close a budget shortfall.

Stateline.org’s annual review of all 50 states found much of the 2009 legislative session was spent frantically trying to patch budget holes with a windfall of federal stimulus dollars that many weren’t sure how to tap. All but North Dakota and Montana had budget gaps when drafting their current 2010 budgets. Even with an infusion of an expected $49 billion in stimulus funds during the year, states were forced to take dramatic measures to balance their ledgers for 2010:

  • At least 18 raised personal income and/or state sales taxes, with seven states levying higher taxes on those in upper-income brackets;
  • At least 18 will collect more revenue in cigarette and/or alcohol sales;
  • Some 35 states cut higher education spending or increased tuition;
  • At least 26 states slashed funding to prisons, including seven that reduced spending by more than 10 percent and another seven states closed prisons entirely;
  • 17 forced state employees to take furloughs or unpaid leave, affecting more than 830,000 employees, and at least six offered state employees buyouts;
  • At least four states are forcing Medicaid patients to pay more for their care, and at least eight states cut optional benefits under Medicaid, the joint federal-state program that provides health coverage to more than 60 million low-income people;
  • Seven sought new gambling revenue, including Delaware, which this fall will join Nevada as the only states to allow sports betting. Ohio approved some 17,500 slot machines at race tracks, and Illinois added video poker at bars.

Read the whole thing, and while you're there be sure to check out Stateline's 2009 Legislative Review, a new web resource that offers state-by-state reviews of enacted budgets, trends in state policy on issues like education and health care, notable new laws, and more.

Leonard Gilroy is Director of Government Reform


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