States Face $26B Gap Before June 30, NCSL Finds

State budget gaps have grown by 50 percent in the last two months and state policymakers will work to resolve unprecedented budget shortfalls for the next 15 months, according to findings from the latest budget survey released by the National Conference of State Legislatures (NCSL).

Based on information collected from legislative fiscal directors in late January 2003, NCSL reports that two-thirds of the states must reduce their budgets by nearly $26 billion between now and June 30, which ends the current fiscal year in most states. In November, when NCSL issued its last report, states projected a cumulative gap of $17.5 billion. States already had addressed a $49.1 billion shortfall as they crafted their fiscal year 2003 budgets.

State legislatures face a minimum $68.5 billion budget shortfall for FY 2004, and with a third of the states unable to provide estimates for the NCSL survey, next year's cumulative budget deficit could rise significantly. Thirty-three states estimate budget gaps in excess of 5 percent, with 18 of those facing gaps above 10 percent.

Sluggish revenues are a major contributor to the budget shortfalls, according to the report. At least 30 states say revenue collections are below budget forecasts, with 12 of these reporting collections below revised estimates. Thirty-seven states say spending is exceeding budgeted levels, with all but five reporting excessive Medicaid or health care costs.

The report says states have been using rainy day funds, tapping other state funds, delaying capital projects and cutting spending to balance their budgets. Twenty-nine states have imposed across-the-board budget cuts.

Copies of State Budget Update: February 2003 are available for purchase from NCSL. For ordering information, contact NCSL's marketing department at 303-364-7812 or books@ncsl.org.