Tag Archives: Planet Money

As the Economy Recovers, State Budgets Continue to Worsen

Present state budget crises will likely seem mild compared to what they will face in F Y2011. In order to comply with  their constitutionally mandated balanced budgets, many states relied on one-time gimmicks to pass their FY 2010 budgets and must now turn to even more drastic measures.

In California, Governor Schwarzenneger’s proposed solution to close a $19 billion dollar funding gap is to rely on $8 billion of hoped-for federal aid. This prediction was deemed overly optimistic by the state’s Legislative Analyst’s Office. However, that Gover Schwarzenneger is relying on federal funding at all should signal that the states’ “one-time” federal bailout last year has created a culture in which state legislators look to higher levels of government to fix their fiscal irresponsibility.

The current state budget problems exemplify the danger of fiscal gimmickry: one-time solutions allow states to pass their budgets when the crunch hits, but they create long run problems as the structural gaps between spending and revenue grow over time. Continue reading