Of 36 States Facing Deficits This Year, 22 Are Increasing Spending

December 16, 2008 - 6:51 PM
Thirty-six of 50 states – or 72 percent – have face budget deficits in fiscal 2009, according to a mid-year report released Monday by the National Governors Association and the National Association of State Budget Officers.

Calif. Arnold Schwarzengger at a news conference in Sacramento, Calif., announcing state budget crisis. (Photo Courtesy of the State of California)

(CNSNews.com) – Thirty-six of the 50 states – or 72 percent – are now facing budget deficits in fiscal 2009, according to a mid-year report released Monday by the National Governors Association and the National Association of State Budget Officers.
 
At the same time, 22 of these states facing deficits have adopted budgets that call for increased spending in fiscal year 2009. (See chart.)
 
Over the past 30 years, according to the report, states have increased spending by an average of 6 percent each year. That trend slowed a bit in 2008, when spending increased by only 5 percent.  Budgets enacted for 2009 actually decreased total state spending nationwide by 0.1 percent.
 
In 2008, spending by all 50 states totaled $689.5 billion.  In 2009, states appropriated $689.1 billion in spending.
 
Even while overall state spending nationwide is decreasing, however, 32 individual states are actually increasing spending. Total spending for 2009 declined because a minority of states actually cut spending.
 
Eighteen states have budgets with spending levels that declined this year, Scott Pattison, the executive director of the National Association of State Budget Officers, said in a press conference in Washington Monday.
 
Many states are collecting significantly less revenue than they had counted on when they drafted their budgets six months ago, he added.
 
They weren’t planning on the loss in sales tax, corporate income tax and personal income tax that came along with the downturn in the economy, Pattison said.
 
Thus far, state budget short-falls total $30 billion--a number that does not include deficit amounts still being determined in five states.
 
Pattison expects state budget deficits will total between $180 and 200 billion over the next two years.
 
NASBO is working with the NGA in developing a recovery package for struggling states. The package would include federal funding to help the states cover their shortfalls.
 
“The purpose is not so much to bailout the states, but to offset the effects of cuts they will have to make,” said Raymond Scheppach, a spokesman for NASBO.
 
Scheppach anticipates mid-year spending cuts because many states are required by state law to balance their budgets by the end of the fiscal year. 
 
States facing red ink will be forced to raise taxes, cut services or both.
 
California, which is one of the states that increased spending in 2009, currently has a $9.5 billion deficit. The state’s constitution does not allow it to carry a deficit over into the next fiscal year. Recently, California asked the federal government for a $7 billion loan just to pay state-employee salaries.