Just weeks after more than half of the states closed shortfalls totaling $48 billion in their 2009 budgets, 13 of those states' budgets have fallen out of balance again, according to a report by the Center on Budget and Policy Priorities. In the six of these 13 states that have made specific estimates, the new gaps total $4.4 billion, or 4 percent of their budgets. These shortfalls, which reflect the continuing weakness of the economy, highlight the growing need for the federal government to provide fiscal relief to states, as it did in the last downturn.
"If states close large budget gaps by cutting things like health care for low-income families and services for seniors, that won't just harm some of the very people already struggling as a result of the sour economy, but will also slow the economy further," said Iris Lav, deputy director of the Center and one of the report's authors. "Congress can help states avoid such damaging cuts by providing fiscal relief in a timely manner."
The 13 states facing new, mid-year shortfalls for fiscal year 2009 (which began on July 1 in most states) are Arizona, Connecticut, Florida, Georgia, Illinois, Massachusetts, Nevada, New Hampshire, New York, Ohio, South Carolina, Vermont, and Virginia. Both the size of the shortfalls and the number of states affected will likely increase in coming months if state revenues remain weak. State sales tax revenues have been hurt both by the bursting of the housing bubble (which has reduced sales of products such as appliances and furniture) and by slower consumption of other products, and job losses are reducing state income tax revenues.
Twenty-nine states moved to close $48 billion in shortfalls as they adopted their budgets for this fiscal year. Two of these states, California and Michigan, have yet to adopt final 2009 budgets. In general, states closed those gaps through some combination of spending cuts, use of reserves, and revenue increases. Spending cuts around the country include:
- At least 13 states have implemented or are considering cuts that will affect low-income children's or families' eligibility for health insurance or reduce their access to health care services.
- At least 13 states are cutting or proposing to cut K-12 and early education; several of them are also reducing access to child care and early education.
- At least 11 states are significantly increasing the cost of medical, rehabilitative, home care, or other services that are needed by low-income people who are elderly or have disabilities, or cutting such programs completely.
