Numbers, Facts and Trends Shaping Your World

The Precarious State of Statehouse Budgets

by Pamela M. Prah, Staff Writer


States awash in surpluses for the past two years are now treading water, with several desperately looking for lifelines to help them get out of budget trouble.

A slumping housing market and skimpier sales tax collections are busting budgets from California to Florida at a time when national job growth is sluggish and consumer confidence is at a nearly two-year low.

“The forecast is looking pretty grim,” Sujit M. CanagaRetna, a state tax expert for the Council of State Governments, said. “The implications for states are serious.”

Experts say it’s too early to tell if all state budgets will spiral into massive deficits in the coming year, but some states already see gaps in their ledgers:

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  • The Florida Legislature is expected to vote this Friday (Oct. 12) on a deal to dig itself out of a $1 billion hole through cuts in education, health care and courts.
  • Michigan was pushed to the brinks of a statewide government shutdown because it first had to erase an $800 million deficit for its current fiscal year before it could pass a new budget for an Oct. 1 deadline. The new package relies on hikes in the personal income and sales tax and new taxes on an array of services.
  • Maryland needs to bridge a looming $1.7 billion deficit. Gov. Martin O’Malley (D) has pitched bumping up personal income, sales and tobacco taxes and relying on slot-machine gambling to gin up $550 million for the state.
  • Both Arizona and Virginia are looking at more than $600 million shortfalls in their current two-year budgets. Layoffs, hiring freezes and tapping rainy day funds are among ideas under consideration.
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