As the national economy warily recovers from the Great Recession, state finances continue to face monumental challenges in grappling with the sharpest drop in tax receipts in decades. And, even after slashing their budgets substantially in fiscal year 2009, states are staring at new mid-year gaps that have opened up in the current fiscal year (2010) with more gaps forecasted for fiscal years 2011 and 2012. While none of this is new information, what makes the state fiscal outlook quite daunting is that the current revenue shortfalls and huge budget gaps masks a number of enormous fiscal challenges looming in such areas as healthcare, education, public pensions, emergency management, infrastructure, transportation and unemployment insurance. States will have to contend with these significant challenges once the current crisis abates.
