Looming budget gaps for fiscal 2012 are the top concerns state legislators face as they begin their 2011 lawmaking sessions, according to a survey conducted by the National Conference of State Legislatures.
In the survey, released Monday, the NCSL asked legislative fiscal directors to list the top three issues in their states for the upcoming sessions — and not surprisingly, the budget topped the list in two-thirds of the states surveyed.
States with budget anxiety included Georgia and Tennessee, where officials said they will need to implement further spending cuts to offset the loss of federal stimulus money.
Montana budget officials said their challenge will be to prioritize spending without incurring litigation.
Officials in Minnesota reported that the budget problem “is so large that [it] is hard to imagine other distinctive fiscal issues,” according to the survey.
The other top four concerns listed by survey respondents were health care and Medicaid funding, education funding, taxes and revenues, and pensions and retirement.
However, many of these are tangentially related to budgets because they may lead to or increase shortfalls.
Massachusetts, for example, listed health care costs as its top concern because fiscal 2012 will not include enhanced federal contributions to the state’s Federal Medical Assistance Percentage — an added cost the state will have to make up for on its own.
The NCSL estimated budget gaps would total $26.7 billion in fiscal 2011 and $82.1 billion in fiscal 2012. But the estimates are from the state budget update that the group issued in November.
More recently, the Center for Budget and Policy Progress reported 40 states are projecting budget gaps totaling $133 billion for fiscal 2012, with 11 already reporting mid-year shortfalls for fiscal 2011.
Many budget officials are gritting their teeth for fiscal 2012, which begins July 1 of this year for most states, because of the loss of federal stimulus aid from the American Recovery and Reinvestment Act. Four states listing the budget as their top issue said their concerns stemmed from the expiration of ARRA.
But as the stimulus aid disappears, states are seeing stronger tax revenues. The Rockefeller Institute of Government reported in November that state tax revenue grew 3.9% in the third quarter from a year earlier, but that states still face “significant budget challenges.”
Though state tax revenues are recovering, budget officials said the money will not be enough to compensate for the loss of ARRA funds.
The tax revenue rebound will help replenish state coffers, but the growth in receipts “doesn’t come anywhere near filling the holes” left behind after ARRA, Georgia state Sen. Don Balfour, the NCSL’s immediate past president, said Tuesday.
Georgia’s fiscal 2011 budget assumed tax revenues would grow by about 4%, he said, and so far reality has met that projection.
However, Georgia faces a $2 billion budget gap for fiscal 2012 — a hole legislators will have to fill without the $1.4 billion that was appropriated to the state for fiscal 2011 from ARRA, according to Balfour, a Republican. Tax increases have become increasingly difficult to approve across the country, meaning the budget gap will be closed with spending cuts, he said.
The state’s cost-cutting decisions come down to “do we amputate your right leg or your left leg?” Balfour asked.
He noted that Georgia has cut state employees’ pay by 10% through furloughs.
“The next billion dollars isn’t furloughs,” Balfour said. “The next billion is laying people off.”