New York Gov. David Paterson talks to South Carolina Gov. Mark Sanford prior to a hearing before the House Ways and Means Committee on Capitol Hill, Oct. 29. The session focused on economic recovery.
For the most up-to-date information on state budget shortfalls, please view our newer analysis: "State Budget Problems Worsen: 13 States Face New Shortfalls" (cliick here)
Updated August 5, 2008
29 STATES FACED TOTAL BUDGET SHORTFALLOF AT LEAST $48 BILLION IN 2009By Elizabeth C. McNichol and Iris Lav
At least 29 states plus the District of Columbia, including several of the nation’s largest states, faced an estimated $48 billion in combined shortfalls in their budgets for fiscal year 2009 (which began July 1, 2008 in most states.) At least three other states expect budget problems in fiscal year 2010.
In general, states closed these budget gaps through some combination of spending cuts, use of reserves or revenue increases when they adopted a fiscal year 2009 budget. At this point in the year, most states have already adopted those budgets; only two states — California and Michigan — continue to deliberate.[1] In order to present a complete picture of the impact of the current economic downturn on state finances, we report both the gaps that have been closed and those that will be closed in the future.
The bursting of the housing bubble has reduced state sales tax revenue collections from sales of furniture, appliances, construction materials, and the like. Weakening consumption of other products has also cut into sales tax revenues. 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. And if the employment situation continues to deteriorate, income tax revenues will weaken and there will be further downward pressure on sales tax revenues as consumers become reluctant or unable to spend.
The vast majority of states cannot run a deficit or borrow to cover their operating expenditures. As a result, states have three primary actions they can take during a fiscal crisis: they can draw down available reserves, they can cut expenditures, or they can raise taxes. States already have begun drawing down reserves; the remaining reserves are not sufficient to allow states to weather a significant downturn or recession. The other alternatives — spending cuts and tax increases — can further slow a state’s economy during a downturn and contribute to the further slowing of the national economy, as well.
A nation or a state cannot have a tax base WITHOUT employment. Some of these states have the highest unemployment rates in the nation !
METROPOLITAN AREA EMPLOYMENT AND UNEMPLOYMENT: SEPTEMBER 2008 (click here)
Unemployment rates were higher in September than a year earlier in 349 of the 369 metropolitan areas, lower in 14 areas, and unchanged in 6 areas, the Bureau of Labor Statistics of the U.S. Department ofLabor reported today. Ten areas recorded jobless rates of at least 10.0 percent, while nine areas registered rates below 3.0 percent. The national unemployment rate in September was 6.0 percent, not seasonally adjusted, up from 4.5 percent a year earlier....
...Elkhart-Goshen, Ind., recorded the largest jobless rate increase from September 2007 (+5.1 percentage points). This area has experi-enced layoffs in transportation equipment manufacturing for several months. Rocky Mount, N.C., had the next largest rate increase (+3.9 points), followed closely by El Centro, Calif., and Yuma, Ariz. (+3.8 points each). Seventy-eight additional areas registered over-the-year unemployment rate increases of 2.0 percentage points or more, and another 179 areas had rate increases of 1.0 to 1.9 points. Two Arkan-sas areas experienced the largest jobless rate decreases from Septem-ber 2007: Jonesboro and Hot Springs (-1.0 and -0.8 percentage point, respectively).
