WASHINGTON - States are headed for another two years of financial distress, according to a fiscal survey of states released this morning by the National Association of State Budget Officers and National Governors Association.
The forecast comes after fiscal 2010 proved the most difficult year since the Great Depression for state financial management, the groups said, adding that the recession’s ability to chip away at tax revenues from every source will endure through fiscal 2012.
State general fund spending in particular has been hard hit -- outlays fell to an estimated $612.9 billion in fiscal 2010 from $657.9 billion in fiscal 2009. At the same time, spending has declined throughout the past two fiscal years, which is unprecedented and is only the second time in the history of the survey that states have decreased their general fund expenditures.
Forty states pared their general fund spending from 2009 levels, and governors for 13 states recommended lowering general fund outlays for fiscal 2011.
The cuts to general fund spending is due to “significant declines in sales, personal income, and corporate income tax collections,” which make up 80% of general fund revenues, according to the report. Revenue declines also caused 40 states to make mid-year budget cuts totaling $22 billion, the report said.
The drop in revenues, paired with increased demand for services such as Medicaid and public assistance, will have caused a total of $296.6 billion in budget gaps between fiscal 2009 and 2012. However, nearly 60% of those budget shortfalls have already been faced by the states.
