Some combination of stimulus aid, cost slashing. and IOUs has allowed states to cobble up ostensibly balanced budgets for 2009. It’s been impressive.
But as The Washington Post reports, 2010 looks to be even worse. Not surprisingly, all of these budget “solutions” were really just stopgap measures designed to kick the ball down the road, until which time politicians can dream up more contribed stopgap measures.
Revenue is expected to remain depressed, even if the national economy improves. There will be only half as much federal stimulus aid available, and many states have already used up their emergency reserves.
Most states have just approved a budget for the fiscal year that began July 1, and their legislatures have adjourned for the summer. But in a dozen or more states, those budgets have already gone into the red less than two months into the fiscal year, by a total of about $24 billion. More than 30 states are projecting deficits for next year, according to the centre on Budget and Policy Priorities, a Washington-based think tank, and other expert estimates.
Of course, the catch is that if we actually have the V-shaped recovery more and more people seem to be betting on, the revenue problem might not be as big as its expected to be. Still, it’s hardly any comfort to say that if things improve much faster than people expect, then the budget picture may not be an epic catastrophe.
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