Think Tank Finds State Fiscal Crisis To Carry Into FY05

State budget woes will continue into fiscal year 2005, reports the Washington-based Center on Budget and Policy Priorities. According to the five-page A Brief Overview of State Fiscal Conditions and the Effects of Federal Policies on State Budgets, FY05 estimates released by 21 state budget offices project a combined total shortfall of up to $33 billion — or 9 percent of those states' expenditures. Moreover, the center points out the total does not include FY04 shortfalls that are already emerging in many states as revenues fail to meet projections when the FY04 budgets were approved.

While much media and political attention has been paid to the rising costs of some portions of state budgets, such as Medicare and education, the center reports that state revenues actually dropped by a total of $21.6 billion during FY03. Adjusting for inflation and population growth, state revenues for FY 2003 were $56.9 billion less than in FY01, the center finds.

Despite 29 states raising taxes in the past year to deal with the continuing deficit, the center asserts that "state taxes now make up a smaller share of the economy than at any time in the last thirty years, with the exception of the double-dip recession of the early 1980s."

California, Florida, Georgia, Illinois, New Jersey, New York, North Carolina and Virginia are singled out as facing the largest deficits going into the next fiscal year, which begins next July for most states.

A Brief Overview of State Fiscal Conditions and the Effects of Federal Policies on State Budgets is available at: http://www.cbpp.org/10-22-03sfp4.pdf