State budgets in bleak shape, report says

The recession has put state budgets in a perilous state —
and one that promises to get worse, according to a survey released Monday.

Driven by the same forces adversely affecting the economy
at large — a frozen credit market, rising unemployment, the housing crisis and
increased demand for safety-net programs — states across the country are
gearing up for decreased tax revenue and cuts in government programs, the study
found.

{mosads}These were the conclusions drawn by the National
Governors Association (NGA) and National Association of State Budget Officers
(NASBO) in their joint semiannual “Fiscal Survey of the States.”

“All I can say is, it’s not a pretty picture,” NASBO
Executive Director Scott Pattison told reporters.

“This is probably going to be a four-year difficult
period,” said Ray Scheppach, executive director of the NGA.

Nearly all states must balance their budgets by their
constitutions, meaning that increases in spending or decreases in tax revenue
must be offset by politically unpalatable cuts in state programs.

The combined, two-year budget shortfall across the states
could reach $180 billion to $200 billion, Scheppach said. Total state spending
during that period is projected to be $1.55 trillion, he said.

State governors are pleading with Congress for federal
fiscal relief to help them at least maintain programs such as Medicaid and
welfare and spending on education, public safety, infrastructure, funds for
municipalities and other vital services.

Last Thursday, New Jersey Gov. Jon Corzine (D), Vermont
Gov. Jim Douglas (R) and Wisconsin Gov. Jim Doyle (D) appeared before the House
Appropriations Committee to make the case that states need a portion of the projected
$500 billion stimulus package that Democratic congressional leaders and the
incoming Obama administration are expected to roll out early next year.

“I think it’s quite clear that our nation is at a
crossroads at this very difficult time. Folks who are losing their jobs, their
homes and even their hope are looking to their leaders for help,” Douglas said.

“What we are left with is cutting away our state’s
ability to carry out the most essential expectations that people have for our
government,” Doyle said. “We will be forced to cut the very tools and services
that people depend on to pull them out of a recession and move them ahead.”

States are beginning to make budget cuts already and will
be forced to cut more for the coming fiscal year, according the report, which
puts the states’ problems in stark numerical terms.

“In fiscal 2008, 13 states reduced their enacted budgets,
by $3.6 billion. So far in fiscal 2009, 22 states have cut their enacted budget
by $12.1 billion, with another five forecasting cuts,” the report says.

“State fiscal conditions slowed for most states in fiscal
2008 and have continued to deteriorate in fiscal 2009. While nominal general
fund expenditures and revenue collections increased for many states in fiscal
2008, more than half the states saw negative growth in general fund
expenditures and revenue collections after accounting for inflation,” the
report states.