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U.S, states already eyeing cuts for next budgets
February 4, 2011 / 11:22 PM / in 7 years

U.S, states already eyeing cuts for next budgets

WASHINGTON, Feb 4 (Reuters) - For most U.S. states the next fiscal year does not begin for another six months, but 31 states have already released budget proposals for fiscal 2012 and many include deep spending cuts in education and healthcare, a survey showed on Friday.

According to the Center on Budget and Policy Priorities, which closely tracks states’ fiscal conditions, nearly all states are considering spending less in fiscal 2012 than they did in 2008. That was the last year before the economic recession devastated revenues and forced them to slash spending.

Not only have states not returned to their pre-recession fiscal health, but total proposed spending for fiscal 2012 could be more than 10 percent below 2008 inflation-adjusted levels, the CBPP said.

Recent reports from the U.S. Census Bureau and others show state revenue is growing again. But the increase may not be enough to cover mounting spending pressures or the end of the federal stimulus plan.

Nearly half of all states, 24, project having less revenue in fiscal 2012 than they did in fiscal 2008, according to CBPP data.

“While state revenues are starting to improve across the country, the rate of growth is slow,” it said. Meanwhile, “the cost of meeting people’s needs has increased since the recession began, due both to demographic changes and to the recession.”

At least 22 states are proposing to cut core public services, with 13 states looking into deeply cutting pre-kindergarten or elementary and high school spending.

Another 15 states are considering reducing healthcare spending at a time when people are turning to public programs for help.

According to the CBPP, 4 million more people are projected to receive subsidized health insurance through Medicaid in 2012 than did in 2008 “as employers have canceled their coverage and people have lost jobs and wages.”

At least 11 states are looking into cutting higher education spending for fiscal 2012. California’s governor has suggested dropping funding for the state’s two university systems by $1 billion.

In order to qualify for some of the grants and assistance included in the federal economic stimulus plan, states had to maintain their healthcare and education spending at certain levels. The last of that funding will trickle out in the next few months, forcing states to find savings in new areas.

The $814 billion stimulus plan also included the largest transfer of federal funds to states in U.S. history, causing many to fear they will fall off a “funding cliff” when the extraordinary assistance ends.

“Not only is emergency federal aid ending, but federal policymakers are considering budget cuts that would significantly reduce the amount of ongoing federal funding to states,” said CBPP.

On Thursday, Republicans in Congress said that next week they will suggest $32 billion in domestic spending cuts, opening the possibility that they will send less money to states for infrastructure, law enforcement, education, social services and health.

Because all states except Vermont must end their fiscal years with balanced budgets, states will again turn to cutting spending to deal with declining revenue, although CBPP said eight states could tap their significant “rainy day funds.”

They could also hike taxes to eliminate budget gaps, a politically risky option.

Since the recession began, 30 states have raised taxes and fees. Already for fiscal 2012, five states -- California, Colorado, Hawaii, Massachusetts, and Montana -- are debating new revenue-raising measures such as boosting sales tax rates. (Reporting by Lisa Lambert; Editing by Dan Grebler)

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