State revenues fell by nearly a third in 2009

California Republican Reps. Devin Nunes and Darrell Issa, along with new House Budget Committee Chairman Paul Ryan (R-Wis.), backed legislation last year that would require state and local governments to provide more information about their public pension fund liabilities. The bill also would prohibit the federal government from stepping in to bail out any governments struggling to meet those obligations.

State revenues also took a hit on the tax collection side, as economic pain in the private sector drove down the total taxes collected, which account for roughly half of state revenues, by 8.5 percent. It was the first such drop in those revenues since 2002.

Compounding the fiscal pain is the fact that expenditures by state governments rose 3 percent in 2009, as more people tapped government assistance programs for help during the economic downturn.

However, federal assistance stepped up in the absence of tax dollars, as federal grants increased 12.9 percent from 2008 to 2009 and accounted for nearly one-third of states’ revenues. Increased assistance to state and local governments made up a substantial chunk of the American Recovery and Reinvestment Act.

The economy has recovered somewhat since 2009, but the state budget picture remains grim. States are grappling with a total budget gap of $110 billion for fiscal 2010 and expect another $82 billion shortfall in fiscal 2011, according to the National Council of State Legislatures.