States' Combined FY 2003 Budget Shortfall Forecast: $58 Billion

State fiscal conditions continue to deteriorate dramatically, according to a report released Wednesday at the 2002 Annual Meeting of the National Conference of State Legislatures (NCSL).

In April, 43 states reported budget gaps totaling $27.3 billion collectively. By June 30, the end of the fiscal year for 46 states, the gap had risen to $35.9  billion. Budget gap estimates for FY 2003 show an increase to $57.9 billion. However, because of balanced budget requirements, gaps have been or will be resolved by the time states officially close their books.

2002 State Budget and Tax Actions showed widespread fiscal problems, according to NCSL:

• 12 states reported FY 2002 budget gaps in excess of 10 percent of their general fund;
• State ending balances fell nearly 42 percent from FY 2001 to FY 2002 — from $31.5 billion to $18.4 billion;
• Aggregate rainy day fund balances have fallen from $16.5 billion in FY 2001 to $10.8 billion at the end of FY 2002;
• 26 states collected less revenue in FY 2002 than they did in the previous year;
• 29 states implemented targeted or across-the-board cuts; and
• 19 states tapped rainy day funds.

Estimates for FY 2003 show that the aggregate budget gap will continue to widen to $57.9 billion. California's budget gap of $23.7 billion accounts for more than 40 percent. Thirteen states are reporting gaps in excess of 10 percent of their state general fund budgets. Twenty-five states expect their general fund ending balances to fall from FY 2002 levels, while only 11 expect an improvement.

More information will be available at: http://www.ncsl.org