April 24, 2003
Three Years Later, State Budget Gaps Linger
Total gaps grow to $200 billion since FY 2001
BOSTON - With only two months left in most fiscal years, states must still close a $21.5 billion budget gap in order to comply with their balanced budget requirements, according to a report issued today by the National Conference of State Legislatures.
Entering their third straight year of budget shortfalls, state lawmakers have had to close a cumulative $200 billion budget gap. According to NCSL President and Oklahoma Senator Angela Monson, state policymakers are dealing with complicating factors on both sides of the budget.
"Already plagued by anemic revenue performance, lawmakers have been besieged by spending overruns - from Medicaid to homeland security to emergency snow removal," she said. "The problems have been relentless as most states have run out of the simple, painless options."
During fiscal year 2003, which began on July 1 for most states, 37 states saw revenues failing to meet projections, while only three reported revenues exceeding budget levels. Forty-five states subsequently revised their forecasts, in nearly every instance downward.
The situation is not much brighter for fiscal year 2004. As states craft their budgets for the next fiscal year, estimates show 41 states facing a cumulative budget gap of $78.4 billion. Thirty-seven of those states reported a gap in excess of 5 percent of their general fund, while 19 of these exceed 10 percent.
Monson said the situation is bleak in many states. "Broad cost-cutting measures are being enacted everywhere. Lawmakers are leaving no stone unturned. Services once thought to be sacred are now on the chopping block. K-12 education, social services, Medicaid eligibility, corrections are all being scaled back as states struggle to bring their books into balance."
According to the report, State Budget Update: April 2003, 21 states are consider proposals that would affect funding levels for K-12 education including across the board cuts, reducing transportation funds, slashing state aid for teacher salaries and lowering per pupil state aid.
In addition to spending reductions, many states have turned to revenue enhancements. Six states have increased cigarette taxes and two have increased taxes on beer. Others have delayed previously enacted tax cuts, increased health insurance premium taxes and boosted taxes on cell phones and other phone services.
As state budget woes continue, many lawmakers hope the end is near.
"Most lawmakers figured that states would be on solid footing by now," Senator Monson said. "While no one enjoys making difficult budget decisions year-in and year-out, our biggest hurdle at this point is the uncertainty that the future holds.
Complicating matters is an increasing trend on the part of the federal government to pass costs on to the states. Unfunded mandates such as the No Child Left Behind Act, special education and homeland security costs are only fueling the uncertainty in states' budgets. State legislatures have urged members of Congress to view states as an integral partner in national economic recovery efforts.
Copies of State Budget Update: April 2003 are complimentary for members of the media. To obtain a copy, journalists should send an e-mail to press-room@ncsl.org. Others may purchase a copy of the report for $25 plus shipping and handling by contacting NCSL's publications department at 303-364-7700 or by e-mail at books@ncsl.org.
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