The exact nature of the coming economic recession is largely one to be debated amongst economists. But the fact that it will be national in scope, and will be at the center of an historic election year, will obscure some of the downward effects the recession will have on state and local governments. This report on looming state budget shortfalls from stateline.org is unambiguous about the seriousness of the problem. The big picture:
Today, 22 states have a collective budget shortfall of at least $37 billion, which is about the same size deficit they had at the start of the 2001 recession, said [Iris J.] Lav of the Center on Budget and Policy Priorities. If the current downturn follows the path of previous recessions, 35 to 40 states could face budget cuts in 2009, the National Governors Association recently estimated. Deficits are a far greater problem for states, because, unlike the federal government, states must make cuts or even raise taxes to balance their budgets. CanagaRetna said 2001 was different because states were coming off the boom times of the 1990s and didn't have a backlog of unfinished projects as they do now. States are still trying to rein in health care costs and improve their education systems, which together eat up more than 60 percent of state spending. But states also are trying to figure out a way to fix the country's crumbling infrastructure, pegged at $1.6 trillion, collectively.
The article describes a vicious circle where states slash social programs -- such as closing mental health facilities -- to balance their books and thus exacerbate the problems those social programs were meant to address in the first place. But there is another downside. As states make their budgets and programs leaner, they lose the will for legislative experimentation, which effectively kills the idea of using states as "laboratories" for more ambitious projects, like universal health care. Worse, states will turn to alternative revenue streams, such as legalized gambling, in order to meet their shortfalls, which bring with them new social problems that tight budgets are unable to address. But it is hard to see this story getting much coverage due to its dispersive nature (the scenario in each state is different) and the fact that the news cycle will be dominated for the rest of the year by a national recession, a national election, and a nation at war.
--Mori Dinauer
