22 States face new budget shortfalls

[RedEarth]

Economists worry that shriveling tax revenues may signal the onset of a historic fiscal crisis for state governments. Pared-down spending plans crafted just months ago may have been just the start.

By Richard Fausset and Nicholas Riccardi, Los Angeles Times Staff Writers
October 19, 2008

The moribund economy is drying up tax revenues more dramatically than expected, forcing 22 states, including California, to confront growing budget gaps. Some states have already eliminated jobs and services -- and more cuts are likely.

The new shortfalls -- totaling at least $11.2 billion -- come just months after numerous states enacted belt-tightening measures while writing their yearly budgets. Officials also adjusted their revenue projections downward to account for the slowing economy. But in many cases, the actual revenue for the first quarter of the fiscal year, which began July 1, has proven to be even lower.


The gaps "will almost certainly widen" as tax revenues continue to disappoint, according to the Center on Budget and Policy Priorities, a Washington think tank that compiled the state data in a report this month.

Economists and other observers fear the numbers may signal the onset of a historic fiscal crisis for state governments.

"States have been confronted with bad economic circumstances in the past, but never so many states, all at once," said William T. Pound, executive director of the National Conference of State Legislatures.


The revenue pools are shrinking for a number of reasons: Rising layoffs are cutting into payroll taxes. The credit crisis and housing slump are affecting taxes levied on real estate deals. Sales taxes are shrinking as shoppers worried about the economy stay home.

http://www.latimes.com/news/nationworld/nation/la-na-stategaps19-2008oct19,0,3409222.story