States Facing Huge Shortfalls in Budgets

Thirty-six states are facing budget shortfalls totaling $28 billion according to a new report from the National Conference of State Legislatures.  This only five months into the new fiscal year.  The report predicts there will be another $56 billion in shortfalls across 35 states in ’10-’11 and $69 billion in shortfalls across 23 states the year after that.

Many economists think the U.S. economy is beginning to rebound.  But historical analysis shows state budgets continue to struggle long after a national recession ends according to a post on

“Even if the recession is over, state budgets are still in appalling condition and are going to be that way for quite a while,” said Corina Eckl, fiscal director at the National Conference of State Legislatures. “For many states, revenue recovery is not even in the forecast.”

“The states are facing nearly unprecedented declines in revenue collections,” said William Pound, executive director of the NCSL. “Coupled with probable declines in federal stimulus support over the next two year, the state fiscal picture is bleak.  We’re heading into an era of retro budgeting, where state spending is receding to levels five to 10 years ago.”

NCSL asked legislative fiscal directors to calculate when their state entered into the recession and when they expect to come out of it.  Twelve states expect recovery in the first half of CY 2010, with nine others expecting it in the second half of the year. Two states—Iowa and Louisiana—think recovery is more than a year away, projecting a rebound in the early months of CY 2011.

According to the post, budget shortfalls are the result of an “erosion of revenues from falling income and sales tax collections and rising expenses associated with growing Medicaid enrollments.”


For vendor implications, see our post on Sales & Marketing Management magazine’s “Sound Off” blog.

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