Fiscal Outlook

States’ fiscal environments continue to feel the devastating effects of the recession, even though many economists have concluded the recession ended last summer. Economic output—gross domestic product—rose during the third quarter of the 2009 calendar year, albeit at a modest 2.2 percent annual rate, and the economy is expected to continue growing. But state tax revenues have not shown evidence of an expansion as revenues are still falling in many states, and it will likely be a number of years before tax revenues recover.

States and municipalities borrow hundreds of billions of dollars every year through the bond market. In 2008-09, upheaval in U.S. financial markets changed the way governments could borrow money to finance infrastructure building and other activities. State treasurers and other officials responded by changing how they market and package their bonds in order to keep funds flowing to vital projects.

During times of recession, businesses cut back because of a lack of demand for their products, but not so for state governments. As states are losing revenue and having to make do with less—residents hit hard by the down economy often need government services more.

With falling revenues, unprecedented declines in state spending and a national unemployment rate hovering around 10 percent, states face limited options for deficit mitigation as they enter into what will likely be one of the worst budget years since the Great Depression. Facing combined budget gaps exceeding $130 billion over the next two years, along with significant increases in Medicaid spending, this session provided state officials with an overview of the policy responses required to enact transformational changes delivering services as well as options available for deficit mitigation.

E-newsletter Issue #47 | May 27, 2010
 

Renowned economist Arthur Laffer had a simple message to attendees at The Council of State Governments’ Economic Summit of the States:

“If you tax people who work, and pay people who don’t, don’t be surprised if you find a lot of people not working,”  Laffer said on the closing day of the summit May 23.

On May 21, 2010, Paul Priest, Assistant Director, Texas Legislative Budget Board, gave a presentation as part of the CSG Economic Summit on the States' panel: "Closing the Gap: Options for Deficit Mitigation."

On May 21, 2010, Scott Pattinson, Executive Director, National Association of State Budget Officers, gave a presentation as part of the CSG Economic Summit on the States' panel: "Closing the Gap: Options for Deficit Mitigation."

State eNews, Issue #46, May 11, 2010

While some economists believe the national economy began its recovery last year, it will likely take years for states to see any respite from the economic storm wreaking havoc on revenues and fiscal stability. In the meantime, states have to figure out how to balance their budgets using controversial tax increases and program cuts—leading to intergovernmental disagreements, legal challenges and special sessions.

State eNews Issue #44 | April 15, 2010
 

State revenues are down while the demand for services is up—leaving states in a very precarious position as they tackle their 2011 fiscal year budgets. The upcoming fiscal year will be “the most difficult to date,” according to a survey by the National Governors Association.

State eNews Issue #41, March 3, 2010

Even as economists are touting the end of the Great Recession, states are still dealing with the challenges associated with the market collapse, housing bubble bust and a multitude of other fiscal challenges.

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