New Report Shows Depth and Breadth of Recession’s Affect on State Budgets

January 24th, 2011

A new report from the Center on Budget and Policy Priorities shows the continuing effects of the recent recession on state budgets across the nation. According to the report, 44 states are already projecting budget deficits for the next fiscal year. Projected budget shortfalls in those 44 states total $125 billion. Despite the nation’s fledgling economic recovery, for many states, the Fiscal Year (FY) 2012 budget year will be the toughest yet as most federal stimulus funds are ending in FY 2011.

According to the report, the recent recession has brought states the largest state budget shortfalls on records. The figure below shows the current state budget shortfalls compared to those stemming from the last recession.

Click to enlarge

Mississippi is not immune to the national trends and next year’s budget will likely leave many priority areas underfunded. A budget crisis of this breadth and depth requires more than a cuts-only approach. Spending cuts reduce the quality of and access to state services and harm the state’s economy. The budget crisis stems from a revenue problem, not a spending problem. A balanced approach that includes raising revenue is required to allow the state to maintain its vital investments in public services and be ready when prosperity returns.