State Fiscal Crises' More News is Bad News

Local news and national papers alike have been replete with the troubling real results of the growing state budget shortfalls. These stories have broken down the astounding figures – $65 billion and $70-$85 billion budget gaps in FY 2003 and FY 2004, respectively – into their real, daily effects on ordinary citizens. By now, Kentucky’s decision to release prisoners before their sentences were up has become the poster-child for desperate states and their drastic budget-balancing measures. In other similar high-profile cost-saving efforts, some school districts in Oregon and Colorado have turned to a 4-day school week; others have stopped buying new textbooks; still others have cut school athletic and marching band programs; in some districts in Oklahoma, the schools have stopped hiring substitute teachers and are, instead, looking to parents to fill in for teachers. According to the International Association of Firefighters, the state and local budget gaps have resulted in layoffs, station closings, and other reductions in staff, even as new Homeland Security Secretary Tom Ridge calls on local contributions for domestic security.

As discussed in recent Watcher articles, these state budget gaps have an immediacy that the federal-level budget deficits lack, because in all but 1 state (Vermont), state budgets must be balanced each year. As AFL-CIO president John Sweeney describes it, with increased needs due to the weakened economy, previous tax cuts at the state level and reduced tax revenue as a result of federal tax cuts, state legislatures are in the position of “putting a price on every public service.”

In the recent spate of stimulus plans offered by various Members of Congress, the nation’s mayors, the Democratic Governors Association, and various economic think tanks and labor organizations, a large percentage of the total cost goes directly to the states – and in quite a few plans, to localities, as well (for details on these plans, see this OMB Watch chart). The one glaring exception is the President’s “growth” plan, which offers nothing to states. (The funds included in the plan’s $3,000 per person “Personal Employment Accounts” go to states to help unemployed workers with job training expenses – but there is no attempt to address the states’ real fiscal crises.)

Far from providing desperately needed financial assistance to the states, Bush’s tax cut package would actually drain more than $4 billion from state treasuries each year. For a look at what just his $364 billion dividend tax cut would do to your state, see this interactive map. A straightforward look at how many people in your state will get nothing from this and Bush’s other costly tax cuts is available from Citizens for Tax Justice.

back to Blog