What Recovery? Budget Deficits Get Worse for States

Article excerpt

Budget deficits for 2010 have worsened in 39 states in the past two or three months, according to a new analysis by the Center on Budget and Policy Priorities.

State budgets are sliding deeper into the red than many governors and legislators expected only a few months ago.

As a result, states including Washington and Minnesota will have to find ways to fill their widening deficits.

On Friday, a new analysis by the Center on Budget and Policy Priorities (CBPP), a Washington think tank, found that the 2010 budget situation has worsened in 39 states in the past two or three months. The new, additional gap: more than $34 billion.

"The shortfall is emerging as forecasts and data catch up to reality," says Nicholas Johnson, a co-author of the CBPP analysis. "Some states haven't done an official budget projection since last spring," says Mr. Johnson, who is director of the organization's state fiscal project.

This past spring, most states were still trying to recover from trying to fill their 2009 budget gaps. Many used rainy-day funds and one-time gimmicks, and they borrowed as much as their constitutions allowed. Some, such as Connecticut, North Carolina, and Hawaii, raised taxes on the highest-income residents.

The stimulus package passed by Congress in February helped states cover 30 to 40 percent of their shortfall. But revenues have continued to decline for most states.

For fiscal year 2010, CBPP estimates, 48 states are facing budget shortfalls that total $190 billion. (This figure includes the new gap of about $34 billion.)

The following year is not much brighter, with some 41 states anticipating deficits. Initial estimates for 2011 put the gap at $97 billion, but Johnson estimates that the shortfalls are likely to be closer to $180 billion. "By then, we will have seen the end of the federal aid," he says.

State revenues, like employment numbers, often lag behind any improvements in the national economy. …


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