February 10, 2011
Illinois’ budgetary woes put it in the company of states such as California and Nevada that are suffering major economic consequences due to unsound fiscal policies and the current economic climate. However, other states, including those known for better fiscal management, are being forced to make tough choices to reconcile their budgets. The state of Texas, whose economic condition was described in a recent Pew Center on the States’ report as least similar to California’s, is facing a major budget fight as legislators struggle to close an estimated two-year $15-$27 billion budget gap.
As detailed in this Los Angeles Times story, Texas’ budget problems mirror those of California. While California’s one-year budget gap is considerably bigger at $25 billion versus Texas’ $15-$27 billion two-year gap, proportionally as a matter of budget sizes, the budget gaps are nearly the same.
Perhaps because of Texas’ two-year budget cycle, its fiscal woes are just now coming to light. Proposals to fill the gap rely on cutting funding for public education or closing colleges instead of using reserve funds or raising taxes. Health and human services may also take a funding hit as Texas legislators struggle to make ends meet. The budget-cutting mood in Texas is such that Governor Rick Perry has proposed the suspension or consolidation of programs to help reduce expenses. This post on the Fort Worth Star-Telegram’s blog illustrates the separate Texas House and Senate budget reduction plans.
Other states such as Ohio are also encountering major fiscal stumbling blocks. Ohio, a middle-of-the-road state in the Pew Center rankings of fiscal distress, may possibly face a $10 billion budget shortfall next year. The calculation of that sum, which is 20 percent of the state’s total budget, is predicated on the loss of one-time funds as well as growth in Ohio’s Medicaid system. Like Texas, Ohio’s government operates on a two-year budget cycle. It is currently in the middle of its cycle, so those budget shortfall projections may change drastically from now until the next budget is due. The Cleveland-based non-partisan research organization Center for Community Solutions published an analysis of Ohio’s fiscal issues that corroborated the upcoming budget shortfall while also outlining possible budgetary reforms. Like the recommendations detailed in IIFS’ Fiscal Rehabilitation Plan, Ohio may need major – and perhaps painful – reforms to secure future fiscal solvency.
The state of Iowa, one of the states along with Texas that the Pew report lists as being least similar to California, is considering cuts to its education system and implementing increases in tuition costs to balance its books. However, Iowa is in a position where it can actually afford to make some tax cuts. That contrasts greatly with Illinois’ strapped fiscal condition that led to increased taxes and borrowing to bridge its budget problems.
States such as Delaware, Utah, and Virginia, which all earned “A” rankings from the Pew Center report, are also not immune to fiscal troubles. For example, Utah’s shortfall of $28 million for its recently ended budget year pales in comparison to Illinois’ yawning budget gap. Even so, calls for budgetary reforms are growing louder in that state. Virginia has been forced to look for cuts to fill a $4 billion gap in its two-year budget.
To be sure, not all states are facing major financial woes at the level of Illinois. However, as detailed above, even states that are in arguably better fiscal shape than Illinois or California are being forced to make tough choices and cuts to bridge large budget gaps.