NCSL: States face ‘an era of retro budgeting’

For most state governments, January 1 will not signal the beginning of a new year, full of promise and a chance to start from a clean slate. January 1 for many states is the middle of their fiscal year, and according to the National Conference of State Legislators, thirty-six states are already facing $28.2 billion in combined budget gaps.

In the new report, released Wednesday during the non-partisan group’s winter conference, NCSL officials underscored their concerns that despite the supposed end of the US economic recession, state finances are not expected to rebound for at least two years. NCSL fiscal director Corina Eckl says that state budgets will be imperiled for the foreseeable future.

“For many states, revenue recovery is not even in the forecast,” she said in a statement released with the report, State Budget Update: November 2009. “State revenues have plunged, and another cliff looms. Lawmakers are holding on with their fingernails.”

In addition to the impending budget cuts facing state legislators, revenue sources across the board are as low as they’ve been in decades. Personal income, general sales and corporate income taxes continue their downward spiral, leading many state budget setters to continually downgrade forecasts. In Oklahoma, for example, estimates for FY 2010 equaled a 7 percent reduction from FY 2009 revenue collections. November’s report found that in the first quarter of FY 2010 collections had fallen by more than triple to 26 percent below the estimate.

The NCSL report also finds that spending obligations for Medicaid, education and corrections programs were increasing at unexpected rates. Thirty-four states and Puerto Rico currently project a cumulative budget gap of $54.2 billion in FY 2011, the repot continues. Meanwhile, Twenty-three states and Puerto Rico currently project a $68.8 billion budget gap for FY 2012.

A new addition to November’s Update included a calculation by NCSL to calculate when, based of jobs data, states entered the recession and when they might expect to come out of it. According to the report Michigan began losing jobs in the second quarter of 2000, with five other states entering the recession before the nation as a whole. Twelve of the states to respond to the recession question said they expect to return to job growth in the first half of 2010, while nine others are looking towards the second half of next year.

William Pound, executive director of the NCSL, said that declining revenues and the planned draw down of Recovery Act funds over the next two years made the states’ budget situation all the worse.

“We’re heading into an era of retro budgeting, where state spending is receding to levels five to 10 years ago,” Pound said.

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