U.S. News

Facing fiscal 2011, states prepare to cut again

WASHINGTON (Reuters) - After two years cutting spending on schools, healthcare, and other public services, U.S. states are preparing to carve even deeper into funding for fiscal 2011, a think tank report said on Monday.

“These budget pressures have not abated and, in fact, are increasing,” the Center on Budget and Policy Priorities said. “Because unemployment rates remain high -- and are projected to stay high well into next year -- revenues are likely to remain at or near their current depressed levels. This is likely to cause a new round of cuts.”

A Labor Department report last week showed unemployment rates fell in March in some states and state officials warily greeted the data as a sign their economies are on the mend.

But others, including California, continued to set new records with high jobless rates and many states saw no change.

For most states, fiscal 2011 begins this summer and governors are already suggesting cuts that “go even further than those that states have enacted to date,” CBPP said.

In fiscal 2008 and 2009, 45 states and the District of Columbia slashed healthcare or education spending, according to CBPP.

Now Louisiana’s governor is proposing reducing payments to doctors under Medicaid, the healthcare program for the poor, by 3 percent in fiscal 2011 after cutting them by 10 percent.

Minnesota’s governor could cancel state-subsidized health insurance for 21,500 adults and children and eliminate cash assistance for 4,000 families.

California Governor Arnold Schwarzenegger has suggested repealing the state’s welfare program.

All states except Vermont must balance their budgets each year, which forces them to raise taxes or cut spending on social programs. Job cuts can cause lingering stresses for states because revenue from income taxes decline just as residents turn more to public assistance.

Reporting by Lisa Lambert; Editing by Andrew Hay