LANSING – Spending by the 50 states is expected to decline in fiscal 2009, the first such cumulative decline in 25 years, said a report issued on Monday by the National Governors Association and the National Association of State Budget Officers.
The report is the latest evidence of extraordinary fiscal distress stretching across all the states and comes not quite two weeks after a report by the National Conference of State Legislatures warned that the states faced cumulative deficits of $32 billion for the current 2009 fiscal year and as much as $65 billion in deficits for the 2010 fiscal year.
Meanwhile, at a fall NCSL meeting the chief economist for Standard & Poors said states may be forced to raise taxes to keep their budgets balanced because they may not be able to balance them just through spending cuts.
The MGA/NASBO report said state balances are shrinking rapidly, from $70 billion two years ago to $48 billion now.
States are seeing more people apply for Medicaid as they lose jobs or their companies cut health insurance, but at the same time many states are making major cuts to their Medicaid coverage to help control spending.
Meanwhile, David Wyss of S&P said states may have no choice but to enact some tax increases to keep basic services in place if the recession continues to grow. He suggested the states look at consumption taxes, such as sales tax increases, before looking at other taxes to raise.
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