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"A comprehensive, collaborative elections resource."
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An Update on State Budget Cuts
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| Contributor | ArmyDem |
| Last Edited | ArmyDem Mar 15, 2009 10:15am |
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| Category | Analysis |
| News Date | Friday, March 13, 2009 04:00:00 PM UTC0:0 |
| Description | Updated March 13, 2009
At Least 34 States Have Imposed Cuts That Hurt Vulnerable Residents, But the Federal Economic Recovery Package Is Reducing the Harm
By Nicholas Johnson, Phil Oliff and Jeremy Koulish[1]
Summary
The American Recovery and Reinvestment Act includes roughly $140 billion in fiscal relief for state governments, which are facing serious budget problems as a result of the worsening economy. Policymakers in at least 9 states, including Arizona, Colorado, Connecticut, Florida, Georgia, Maryland, Oregon, South Carolina and Virginia have already advanced or enacted plans to use these funds to reverse previously proposed budget cuts and/or to balance their states’ budgets in a way that mitigates potential cuts (see box on next page).
The recovery act funding, however, is sufficient only to fill about 40 percent of the $350 billion to $370 billion shortfall that states face in the next two-and-a-half years. Before enactment of the recovery package, at least 34 states began closing their shortfalls by reducing services to their residents, including some of their most vulnerable families and individuals.[2] Although the recovery package is mitigating states’ fiscal problems, additional cuts are likely in the coming months as states develop budgets for the fiscal year that begins July 1.
Cuts to state services not only harm vulnerable residents but also worsen the recession by reducing overall economic activity. When states cut spending, they lay off employees, cancel contracts with vendors, reduce payments to businesses and nonprofits that provide services, and cut benefit payments to individuals. All of these steps remove demand from the economy. |
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