Study: Budget Conditions Rapidly Deteriorating in States

As Congress prepares an economic recovery package for the states that could be as large as $500 billion, a study finds budget conditions rapidly deteriorating in many states. More than 40 states could be facing gaps between projected tax revenues and planned government spending totaling as much as $137 billion next year, according to a report released this week by the National Conference of State Legislatures.

At least 20 states have already imposed or are considering across-the-board spending cuts. "These budget gaps are approaching those seen in the last recession, which were the worst since World War II, and show every sign of growing larger," says William Pound, the group's executive director. "Our discussions with legislative leaders tell us that they expect the problem to only get worse."

Earlier this week, President-elect Barack Obama promised at a meeting of the National Governors Association that he would provide federal aid to the states "To solve this crisis and to ease the burdens on our states, we're going to need action, and we're going to need action quickly," Obama said. "That means passing an economic recovery plan that helps both Wall Street and Main Street, and this administration does not intend to delay in getting you the help you need."

Fifteen states are forecasting double-digit budget shortfalls next year as the slowing economy continues to dry up tax revenue. With unemployment rising—and the population of the uninsured growing—states are seeing their Medicaid costs skyrocket, experts say.

The study identifies six states with the biggest budget gaps as a percentage of the state's general fund. Further state-by-state breakdowns can be found here.

• Read more by Justin Ewers.
• Read more about Obama's promise to help states.