States Struggle with Budget Deficits as Economic Recovery Slows

The National Conference of State Legislatures released its preliminary state budget update today. No surprises. The budget struggles of most state governments have been well documented over the past several years. Stateline.org has the story.

“While not out of woods,” the report says, “the performance of revenues in many states has officials looking up instead of down.”

Still, the report paints a picture that is far from rosy, particularly as the federal stimulus program winds down. In the fiscal 2011 budgets they’ve already enacted, the states are projecting that budget gaps of more than $12 billion may open up. Looking ahead to 2012, they’re projecting collective deficits of $72 billion. “States really do have few concrete plans to deal with the end of the federal stimulus,” says Corina Eckl, NCSL’s director of fiscal affairs.

It may get worse. The White House released a mid-session budget review late Friday. The Heritage Foundation mined the report and highlights some disappointing numbers. 

According to Friday’s report, the Obama administration now projects that unemployment will average 9% throughout all of next year and 8.1% throughout 2012.And if that news wasn’t bad enough, the report pegs this year’s budget deficit at $1.471 trillion, or 10% of the entire U.S. economy. In nominal dollars, it’s the largest deficit in American history; and as a percentage of the economy, it’s the largest deficit since World War II. To pay for that $1.471 trillion hole, our government will borrow 41 cents of every dollar it spends.

The Wall Street Journal editorial board also takes a dim view of the projections.