States and the Recession

Recession Continues to Batter State Budgets

At least 46 states struggled to close shortfalls that totaled $121 billion when adopting budgets for the current fiscal year (FY 2011, which began July 1 in most states).  These came on top of the large shortfalls that 48 states faced in fiscal years 2009 and 2010.  

Federal assistance has reduced the extent of state spending cuts and state tax and fee increases needed to close the shortfalls.  But it now appears likely the assistance will end before state budget gaps have abated.  If states get no further federal assistance, the steps they will have to take to eliminate deficits will reduce aggregate demand and likely will take a full percentage point off the Gross Domestic Product.  That, in turn, could cost the economy 900,000 jobs next year. Read more

Related: Slideshow: The State Budget Crisis and the Economy

More: State Budget and Tax Analyses