State Budget Update: November 2010

Introduction

Although a recovering national economy is helping to stabilize state revenues in fiscal year (FY) 2011, serious budget challenges await state lawmakers in the New Year. This largely stems from fewer federal stimulus funds available for next year’s budgets. And while state revenues are starting to pick up, the growth is unlikely to be sufficient to replace expiring American Recovery and Reinvestment Act (ARRA) funds or cover projected increases in program areas such as Medicaid and K-12 education. This means another round of budget gaps, certainly in FY 2012, but even beyond in many states. 

Although the national recession officially ended in June 2009, state finances will be slow to recover to pre-recession levels. History shows that state budgets continue to struggle long after a recession ends, and the current fiscal situation offers no exception to that trend. The information in this report is further evidence of that fact.

This report includes information on:

• New FY 2011 budget gaps
• Revenue performance for major tax categories (through October for most states)
• The revenue outlook for the rest of FY 2011
• Spending overruns in FY 2011
• Summary of the current state fiscal situation
• Projected budget gaps in FY 2012 and FY 2013
• A discussion of structural budget gaps.

This report provides information on all 50 states and Puerto Rico. It is based on data collected from legislative fiscal directors in November 2010.