Nose-Diving Revenues Worsening Strained State Budgets

July 27, 2009

States saw a nearly 12% drop in tax revenues collected in early 2009, the largest decline in 46 years, according to a recent report released by the Rockefeller Institute of Government.

The loss of revenues and the persistence of the current recession — now 19 months long and still going — will lead to deeper and expanding state budget shortfalls. According to a recent report from the National Conference of State Legislatures, states' budgets are strained as lawmakers have struggled to close at least $268.6 billion in gaps since the recession started in December 2007.

The silver lining in state finances in FY 2009 and FY 2010 was the AFSCME-supported federalfunds available through the American Recovery and Reinvestment Act (ARRA), signed into law by President Barack Obama in February. Before the act was approved, state lawmakers were considering even deeper cuts to public programs and jobs.

For FY 2010, the ARRA federal funds have staved off some of the cuts and helped to ease budget gaps. The bulk of ARRA state fiscal relief funds ($100 billion) will be disbursed by the end of this year; states will have about half that amount next year. In the meantime, AFSCME continues to press Congress to provide additional fiscal relief for states.