The National Conference of Legislatures has a new report on the fiscal health of the states. It’s a grim picture. Budget gaps that started appearing in 2008 are likely to continue into 2011. While enacting FY 2009 budgets, 44 states filled a total $40 billion gap. But within a few months, budgetary gaps reopened, this one topping a $62.4 billion.
The main cause is the drying up of revenue streams. And each state has its own vulnerabilities: New Jersey and New York are tied to Wall Street, Hawaii is linked to the tourism industry. Given the depth of the recession, and these types of structural dependencies, it’s proving very hard for states to maneuver out of the crisis.
This gets back to the fiscal choices and assumptions of governments. We’ve heard about “aggressive accounting” – creative, and suspect accounting practices. Now we may be seeing the results of “aggressive budgeting,” – the tendency to expand spending on the assumption that revenues only go up.
The next chapter for the states, an estimated budget gap totaling $121.2 billion in 2010, says Corina Eckl of NCSL, “The fiscal situation facing the states is like a bad horror movie. The details get more grusome and they never seen to end.”