States Still Dealing with Recession

E-newsletter Issue #62/January 6, 2011

As states are pulling out of the Great Recession, they face a multitude of challenges—creating jobs, addressing poverty, repaying the federal government loans from the unemployment insurance trust funds and, generally, doing more with less money.

Fiscal challenges are the Hot Topic of the January/February issue of Capitol Ideas, the bimonthly magazine of The Council of State Governments.

“We are coming out of the Great Recession and the biggest concern that people have in Montana—and I can bet you it’s California and New York as well—is jobs,” said Montana Gov. Brian Schweitzer, the 2011 CSG president. “We’ve got to create jobs, and higher paying jobs with benefits.”

That’s especially important as the number of those classified in poverty has risen and median incomes across the country have fallen. The number of those in poverty grew in every state except Louisiana and Maine, where poverty levels remained the same.

Poverty is especially intrinsic to the South. Twelve of the 19 states with poverty levels above the national average are in the South. Several states across the country are striving to address that particular challenge, establishing task forces to try to come up with solutions.

“Having a task force isn’t the silver bullet to implementing the solution,” said Jodie Levin-Epstein, deputy director of the Center for Law and Social Policy, which studies poverty across the nation. “Having a task force is a vital tool in driving interest in finding the solution and making sure implementation is done right.”

According to the U.S. Census Bureau, the median household income dropped in nearly every state from 2008 to 2009. Only households in Washington, D.C., and North Dakota saw a slight increase in median income. The biggest drop came in Michigan, where median income fell 6.2 percent from $48,246 annually in 2008 to $45,255 in 2009.

State budgets have also shrunk as their obligations are growing. Some states are looking for more efficiency in different areas. In Pennsylvania, for instance, the Comptroller’s office centralized its operations and went paperless. The new system and organization reduced overtime costs by 47 percent and travel expenses by 63 percent.

Maryland’s new Modernized Integrated Tax System snagged $65 million in back taxes simply by upgrading to the latest technologies. Tennessee changed its business tax collection system and was able to identify nonfilers by using existing data sources, including other state tax registration information and data from other state and federal agencies. Those efforts have helped the department to assess more than $1.7 million in business taxes and collect more than $1.2 million of that amount.

Other states have seen some bright spots in the down economy thanks to some innovative actions. Vermont, for instance, established and Economic Development Authority to help small businesses. Because the authority uses state funds to buy down loan rates, it can offer businesses a deal even when other banks are less likely to award loans in a tight economy.

North Dakota is making good use of its trade office, helping companies in the state to grow their exports to countries all over the world. “We are a small, highly networked state,” said North Dakota Department of Commerce Commissioner Shane Goettle. “We go to the markets, we talk to the buyers ourselves (and) we invite them back here.”

Growing jobs is important, especially since so many people have lost theirs during the recession. States have had a hard time keeping up unemployment payments over the years, and many have had to borrow from the federal government. Now, those states will have to start paying interest on those loans.

CSG Resources

Capitol Ideas