State Budget Deficits Growing By Leaps And Bounds
State budget gaps have grown by 50 percent in the last two months and state policymakers will work to resolve unprecedented budget shortfalls for the next 15 months, according to a report released by the National Conference of State Legislatures.
. The latest NCSL survey reports that two-thirds of the states must reduce their budgets by nearly $26 billion between now and June 30, which ends the current fiscal year in most states. In November, when NCSL issued its last report, states projected a cumulative gap of $17.5 billion. States already had addressed a $49.1 billion shortfall as they crafted their fiscal year 2003 budgets.
The news gets worse for budget planners. State legislatures face a minimum $68.5 billion budget shortfall for FY 2004. About a third of the states could not provide estimates for the NCSL survey, so next year’s cumulative budget deficit could rise significantly.
“The magnitude of next year’s budget gap is startling,” said NCSL President Angela Monson, a state senator from Oklahoma. “Thirty-three states estimate budget gaps in excess of 5 percent, with 18 of those facing gaps above 10 percent. There is great cause for concern since the deficit numbers continue to grow at an alarming rate.”
Sluggish revenues are a major contributor to the budget shortfalls, according to the report. At least 30 states say revenue collections are below budget forecasts, with 12 of these reporting collections below revised estimates. Thirty-seven states say spending is exceeding budgeted levels, with all but five reporting excessive Medicaid or health care costs.
“State budgets are under siege,” the report says. “The faltering national economy, declines in the stock market, contractions in the manufacturing and high-tech sectors and soaring health costs have combined to undermine the stability of state budgets.”
The report says states have been using rainy day funds, tapping other state funds, delaying capital projects and cutting spending to balance their budgets. Twenty-nine states have imposed across-the-board budget cuts.
Medicaid spending has been cut in 13 states, higher education in 12, and nine states have cut elementary and secondary education and corrections spending. In addition, nine states have cut off state employee travel and nine have enacted state employee layoffs.
In the current legislative sessions, at least 24 states say the governor or a member of the legislature has offered tax increase proposals to help eliminate the budget deficits. At least 14 states will consider higher cigarette taxes while another six will consider increased alcohol taxes.
Also of concern to states are the actions of Congress and the Administration in the months ahead. Monson said state budget planners are concerned that the proposed federal budget for next year does not meet the cost of mandates for the No Child Left Behind Act, special education and election reform. She added that states are still waiting on an agreement on the current fiscal year budget to be finalized, particularly on issues such as welfare reform and homeland security.
“States stand ready to be partners with the federal government in leading the way to economic recovery,” Monson said. “America’s state legislatures will strongly advocate changes in the federal budget to create jobs, fully fund federal mandates and meet the challenges of the changing economy.”
NCSL’s fiscal report is based on information collected from legislative fiscal directors in late January 2003. It covers the revenue and expenditure situation midway through FY 2003 for most states.
Forty-six states began their fiscal year on July 1. The four exceptions are New York (April 1), Texas (Sept. 1) and Alabama and Michigan (Oct. 1).
