Issues / Legislation » Federal Budget & Taxes

AFSCME’s Position – State Fiscal Relief


The burst of the housing bubble and failing economy have led to budget crises in state and local governments across the country. For FY 2009, 28 states and the District of Columbia face a combined $40 billion budget shortfall. Because states cannot run deficits or borrow to close a revenue gap, they are forced to starve vital services, cut local government aid and lay off public employees. At least 17 states are already cutting or proposing such cuts, and myriad local governments are following suit.

The fiscal stimulus package passed earlier this year did virtually nothing to help states confront these challenges.  Thus AFSCME is urging Congressional leadership to pass a second stimulus package – one aimed at helping state and local governments avoid financial catastrophe.  Specifically, AFSCME is working with a coalition of health care providers, public employees and others to advocate a temporary increase in federal Medicaid payments and other states grants.  Medicaid represents on average 21% of total state expenditures.  Thus providing assistance with Medicaid will ease the pressure states face to cut services in other areas. 

In addition to protecting vital public services, this temporary infusion of new federal dollars would help reduce the depth of the current recession by increasing economic activity.  According to Mark Zandi, chief economist for Moody’s, every dollar invested in state and local government yields $1.36 in economic activity.

States with Budget Shortfalls in FY09

The following states will experience major budget shortfalls and cuts in vital public services unless Congress acts:

  • Alabama
  • Arizona
  • California
  • Delaware
  • District of Columbia
  • Florida
  • Georgia
  • Illinois
  • Iowa
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Nevada
  • New Hampshire
  • New Jersey
  • New York
  • Ohio
  • Oklahoma
  • Rhode Island
  • South Carolina
  • Tennessee
  • Vermont
  • Virginia
  • Wisconsin

What you can do

Contact your Senators and Representatives and press them to actively support federal funding for your state’s Medicaid program and for flexible grants to state and local governments. Where you are already threatened with budget shortfalls, please let them know how the shortfalls will impact AFSCME members and the services they provide.

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