Page 428 - untitled
P. 428
THE ECONOMIC FALLOUT
budget shortfalls facing the states “are staggering numbers. It’s not just the big states;
it’s almost all states.” He said the “great transformation” occurring in state finances
means states are forced to “reorient their whole stance vis a vis the kind of programs
and services they offer their citizens.” In the fiscal year alone, which started
July , states must come up with billion in savings or new revenue to balance
their budgets, one study estimated. By the fall of , there was some good news:
revenue from some taxes and fees in some states had started to pick up, or at least
slowed their rate of decline.
In a September report, the National Conference of State Legislatures de-
clared that the states “are waiting to see if the economy will sustain this nascent rev-
enue growth. . . . And despite recent revenue improvements, more gaps loom as states
confront the phase out of federal stimulus funds, expiring tax increases and growing
spending pressures.”
Some states were hit harder than others, either because they were particularly
affected by the crisis or because they came into the crisis with structural budget
problems. In , New Jersey Governor Chris Christie proposed chopping
billion—or a quarter—of the state budget to eliminate a deficit. California officials
struggled through the summer and fall to close a billion shortfall, an amount
larger than the entire budgets of some states. Nonetheless, the state’s independent
budget analysis office said in November that the deficit had instead grown to
billion— billion in the billion budget for this year and billion in the fis-
cal year commencing in June . As people lost jobs, many also lost their health
insurance, helping to drive . million Americans into the Medicaid program in
alone, an increase—the largest in a single year since the early days of this
government health insurance plan, according to the Kaiser Family Foundation, a
nonprofit organization focusing on health care research. Every state showed an en-
rollment increase: in nine states it was greater than ; in Nevada and Wisconsin,
greater than .
States share the cost of Medicaid with the federal government. Congress included
billion in the stimulus package to help them with this expense, and it has ex-
tended the assistance through June at a reduced level. If the economy has not
improved by then, Kaiser predicts, paying for this program will be another huge po-
tential source of trouble for the states.
The National League of Cities recently said that U.S. cities are in their worst fiscal
shape in at least a quarter of a century and probably have not yet hit bottom—even
after four straight years of falling revenue. Because property taxes are one of the
main source of revenue for most local governments, and because some local assessors
are only now recording lower property values, their revenue is likely to continue to
decline for at least several more years.
“The effects of a depressed real estate market, low levels of consumer confidence,
and high levels of unemployment will likely play out in cities through , and
beyond,” the survey of cities reported. The authors of the survey projected that
revenue would fall in , and cities’ budgets would shrink another , the
largest cutbacks in the years for which the group has published the report. 
