State Budgets
State budgets have been hit particularly hard in the current economic recession. While states have been making sharp cuts in funding, they are still facing serious budget gaps. States will likely continue their struggle to find the revenue needed to support critical public services for several years to come.
According to a report by the Center on Budget and Policy Priorities, however, states have many available options as they begin to look at closing their budget deficits. While states normally rely on tax increases and spending cuts as important factors in an overall balanced approach, how they are used is critical for both the citizens and the economy in a state.
The Center for Budget and Policy Priorities recommends seven options for a balanced approach to dealing with state deficits. They include:
- Efficiency – focusing on goals of expenditures and whether there are better ways to reach these goals;
- Use of all available resources – employing reserves, rainy day funds, and federal fiscal relief funds;
- Scrutinizing all spending – not just budget appropriations, but also tax break programs;
- Improved collections – aggressively seeking taxes that are not being paid;
- Tax increases – focusing on increases that have a more positive impact on the economy than spending cuts;
- Prioritization – carefully deciding the effectiveness of spending cuts and tax increases; and
- Paying close attention to future impacts, while attempting to fix today’s issues.
With most legislatures already in session, state legislators are looking into ways to tackle their state’s budget deficits. As they begin to work towards passing budgets for the next fiscal year, many states are taking steps to address their current fiscal climate.
In Illinois, Governor Pat Quinn has created a website providing details on his state’s grim economic situation. In creating this website, the governor hopes to enlist Illinois taxpayers’ input in fixing the state’s economy prior to the release of his budget plan for the coming year. His plan suggests $2.2 billion in spending cuts are needed to reduce the state’s deficit; however, even with those spending cuts, Illinois would still have a deficit of $11.5 billion at the end of 2011.
In Kentucky, House leaders are considering temporarily suspending some tax exemptions to help balance their next state budget. One suggestion was to temporarily suspend tax write-offs for businesses reporting losses. It was estimated the suspension could generate $184 million over two years. In addition, accelerated sales tax collections were also suggested and could possibly provide $90 million dollars. Cuts to higher education funding were also expected in the new budget.
Governor Chris Christie in New Jersey has announced his plan to eliminate eligibility for a key state-subsidized health insurance program for approximately 12,000 legal immigrants and to freeze new enrollment in the program for all other adults in the current fiscal year.
Hawaii’s Governor Linda Lingle is proposing cuts to the state’s workforce, which could lay off up to nearly 2,000 employees. The governor is also proposing eliminating several programs including: a cash assistance program for low-income seniors and individuals with disabilities; the Department of Health’s Division of Community Health and Dental Hygiene; and the state’s Medicaid adult dental service benefits.
As states begin to work towards closing their budget deficits, they are also trying to minimize the damage to individuals, families, and businesses that rely on state programs and services. According to the Center for Budget and Policy Priorities, states should come up with a plan to effectively reduce their deficits and take steps to direct funding towards efficient programs and closely monitor their government spending habits in order to avoid further harm to already fragile economies due to the current economic rece
