Conflicting Budget Estimates Abound

By: - February 3, 2009 12:00 am

billion? $350 billion? Just how big a fiscal hole are states trying to dig out of in this recession? Both eye-popping numbers – and a few more in between – have been bandied about by experts estimating the amount of red ink states have to erase.

The answer is important to Congress as it debates a massive economic stimulus package that would send billions of federal dollars to the states and localities.

At the same time, states are wondering how much money to expect as they begin drafting their budgets for 2010, the new fiscal year that for all but four states begins July 1. Legislatures will either have to raise taxes, cut programs or borrow the money since, unlike the federal government, states must balance their budgets.

The biggest state deficit total comes from the Center on Budget and Policy Priorities, a Washington, D.C., group that focuses on policies that affect the poor. The reason the group’s $350 billion to $370 billion estimate overshoots most others is that it covers projected shortfalls for this fiscal year and extending through fiscal 2011, according to the center’s latest report.

The National Conference of State Legislatures reported in November that state budget gaps could balloon to $97 billion , but that estimate covers only two years – the current fiscal year and 2010.

In a new report released Jan. 30, NCSL upped its estimate by $38 billion and now figures states will have to close shortfalls reaching $135 billion through fiscal 2010. Of that total, states will have to cut $50 billion to make their current budgets balance. That’s on top of the $40 billion states cut while they were drafting fiscal 2009 plans.

NCSL estimates states will have another $85 billion hole in 2010 budgets, up from the $65 billion predicted in November.

Nevada appears to be in the most trouble as it expects a budget gap in 2010 that will exceed nearly 38 percent of its general fund budget, according to NCSL. Other states expecting huge budget holes include: Arizona (28 percent) New York (24 percent), California (22 percent), Louisiana (20 percent), Washington (18 percent) and Hawaii (18 percent), according to the NCSL report.

Among other state deficit observers, the National Association of State Budget Officers came up with numbers similar to NCSL’s over the same time period, while the head of the National Governors Association predicted in December that budget gaps could widen to $200 billion over the next two fiscal years.

Latest figures from the U.S. Government Accountability Office, a congressional watchdog organization, show states and localities will have to close $312 billion in deficits for 2009 and 2010, nearly twice the group’s previous projection in November.

The GAO, unlike NCSL and NASBO that interview state legislative and executive budget officers for their estimates, uses a model to come up with its projection that includes both states and local governments.

Despite the different numbers, all the groups agree that states are in deep trouble. “Each of these surveys clearly indicates that states are facing a fiscal crisis of historic proportions that will continue for a number of years,” the Center on Budget and Policy Priorities said in a Jan. 30 report that looks at the different projections.

GAO concluded, “The current results represent a significant deterioration.”

Arturo Perez, a fiscal expert at NCSL, said when all is said and done, 2010 could be even worse than 2009. “States have already exceeded the highs of the last downturn,” he said, in terms of the shortfalls. “It’s a tough situation.”

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