Posted by Eivind Tandberg
Our colleagues at the Center on Budget and Policy Priorities in Washington DC recently published an interesting overview of the worsening budget situation of many American states (Download 9808sfp1.pdf), authored by Elizabeth McNichol and Iris J. Lav. The report summarizes the fiscal challenges facing the states and describes the steps the states are taking to adress these challenges. Because most states, unlike the federal government, cannot run a deficit, economic downturns will generally have a more immediate impact on the states' fiscal situations.
According to the paper, at least 39 states are seeing shortfalls in their budgets for the current fiscal year compared to the initial budget. Flat or declining revenues are a major source of the shortfalls. Several states have also prepared estimates for future budget years and expect continued fiscal pressures. The paper lists steps that states are taking to reduce spending and close the budget gaps. These include reductions in education and social spending, as well as reductions in workforce.
