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States Struggling With Reality After Optimistic Revenue Projections

1 min readBy: Joseph Bishop-Henchman

The National Conference of State Legislatures (NCSL) estimates that state budget shortfalls totaling $28.2 billion have opened since current state budgets were passed, suggesting optimistic revenue projections, falling revenue, or both. 36 states have taken or must take action to eliminate these shortfalls by the end of the fiscal year.

Some highlights from two excellent Stateline articles on the topic (one and two):

  • Arizona is holding a special session to the consider Governor Brewer’s proposed sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. increase. A proposal to close it with spending cuts failed by one vote.
  • Connecticut must cut $467 million from the current biennial budget.
  • Indiana Governor Daniels says K-12 education must be trimmed next, having been spared during previous rounds of budget cutting.
  • Iowa Governor Culver and Oklahoma Governor Henry unilaterally imposed 10% across-the-board cuts to state agencies. But Massachusetts Governor Patrick has been denied the authority to order spending cuts and must go through the Legislature.
  • Maryland Governor O’Malley, having raised taxes early in the recessionA recession is a significant and sustained decline in the economy. Typically, a recession lasts longer than six months, but recovery from a recession can take a few years. , says further cuts will be difficult and more federal aid is needed.
  • Virginia must close a $300 million shortfall, after adopting a budget that shaved $1.35 billion from planned expenses.
  • Washington State Governor Gregoire proposed a spending plan in line with revenues, but says her budget proposal will include a taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. increase to restore spending.

More on state fiscal policy here.