13 States Face Total Budget Shortfall of at Least $23 Billion in 2009; 11 Others Expect Budget Problems

Source: Center on Budget and Policy Priorities

According to a new report, thirteen states, including several of the nation’s largest, face a combined budget shortfall of at least $23 billion for fiscal 2009. Another 11 states expect budget problems next year or the year after. The initial reports for 2009, which runs from June 2008 to June 2009 for most states, suggest states are returning to a time of budget deficits.

Some of the fiscal problems are due to economic conditions outside states’ control. The bursting of the housing bubble has reduced state sales tax revenue collections from sales of furniture, appliances, construction materials, and the like. Property tax revenues have also been affected, and local governments will be looking to states to help address the squeeze on local and education budgets.

In many states, however, these economic problems are being magnified by endemic budget weaknesses created by past state decisions about taxes and expenditures. Some states have relied on one-time revenues (such as the sale of state assets) to balance their budgets, have enacted tax cuts — often multi-year — without accurately assessing their affordability, and have failed to address structural weaknesses in their budgets.

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