July 20, 2009
State Legislators Face Even More Doom and Gloom
FY 2009 can be summed up in one word: dismal.
FY 2010 can be characterized by two words: even worse.
2009 will go down in history as one of the most difficult in history for state budgets. Hemorrhaging revenues have produced gaping holes in FY 2009 and FY 2010 budgets, and the bleeding is far from over.
State legislators worked to close cumulative budget shortfalls that reached $113.2 billion for FY 2009 and struggled to keep those budgets balanced. Some energy producing states were able to sidestep the majority of the fiscal problems the rest of the nation experienced, but even those states saw their revenues deteriorate. Revenue forecasts were pessimistic, but not pessimistic enough. Not only were states faced with lower revenue growth rates, many actually collected less money that the year before.
As bad as things were in FY 2009, the picture looks worse for FY 2010 and beyond.
The National Conference of State Legislatures (NCSL) has released its latest report, State Budget Update: July 2009. This report shows states had to close a $142.6 billion gap as legislatures enacted their new budgets. This staggering number does not include any new gaps that may open after the fiscal year began, which was on July 1 for 46 states.
"If you think legislators are breathing a sigh of relief because their budgets are passed, think again," said William Pound, NCSL executive director. "If history repeats itself, states are bound to see budget gaps reappear within the first quarter of FY 2010."
Eight states failed to meet their July 1 budget deadlines as legislators and governors became locked in heated debates. At the time of this release, five states had not passed a FY 2010 budget before the fiscal year began.
"Lawmakers are alarmed by looming budget gaps, which just keep getting bigger," said Corina Eckl, director of the fiscal program at NCSL. "They have already taken far-reaching, difficult and often unpopular actions. At this stage of the problem, there aren't many palatable solutions left on the table."
The American Recovery and Reinvestment Act of 2009 (ARRA) may be the silver lining. Without the stimulus money, state fiscal problems could have been even worse. The stimulus money provided through AARA has made NCSL's job made NCSL's job of collecting data very difficult. For instance, states may have reported that general fund spending fell from one year to the next, but ARRA funds—outside of the general fund—may have offset all or parts of those reductions.
NCSL's new report also indicates the cumulative state budget shortfall from FY 2002-FY 2006 (during the last recession) was $263.8 billion. The total cumulative budget totals for FY 2008, FY 2009 and FY 2010, and projected numbers for FY 2011 and FY 2012, already indicate the gap will reach at least $348.2 billion.
"It takes state budgets a couple of years to recover after a recession ends," said Eckl. "The last recession eight months, but it took states five years to fully recover. The current recession has already lasted 19 months and it isn't over. Without a doubt, lawmakers' endurance to resolve extraordinary fiscal problems will be tested for years to come."
NCSL's report provides information collected from legislative fiscal directors in June and July 2009. It includes information on budget gaps in FY 2009 and FY 2010 for all 50 states and Puerto Rico. Because of delayed budget enactment or lack of a budget altogether, 35 states provided additional information and are included in other sections of this report. Additional areas covered in this report include estimated growth rates for FY 2010 revenues, the impact of ARRA funds on state spending changes, a summary of actions states have taken to close FY 2010 budget gaps and forecasts of gaps in FY 2011 and FY 2012.
This report was released during NCSL's Legislative Summit in Philadelphia and the data was shared with legislators, legislative staff and members of the business community. The full report is available online and members of the media are encouraged to call the NCSL Press Room at the Pennsylvania Convention Center to discuss the report with NCSL's fiscal policy analysts.
NCSL is the bipartisan organization that serves the legislators and staff of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.
For more information:
Michelle Blackston
Director of Media and Public Affairs
Washington, D.C.
(202) 624-8667
Meagan Dorsch
Media Manager
Denver
(303)856-1412
