Filed Under:

States' Fiscal Future Starts To Look A Bit Brighter

Play associated audio

As the U.S. economy struggled to get back on its feet over the past few years, a lot of states found themselves contending with big budget deficits. They responded by firing workers, raising taxes and cutting spending. Now the fiscal picture for a lot of states is brightening a bit — but many still face enormous challenges.

Arizona, for example, was hit hard by the real estate meltdown. At the height of the recession the state's finances got so weak that Arizona leaders took an unprecedented step: They sold off most of the buildings in the capitol complex, then leased them back. This year, in her State of the State address, Republican Gov. Jan Brewer told legislators it was time to buy the buildings back.

"I'm asking that you send me a bill by Statehood Day that allows me to buy back the capitol complex," Brewer said, "and together we can celebrate the burning of that mortgage."

Brewer says Arizona can afford to buy the buildings back because its fiscal picture has stabilized. Sue Urahn, with the Pew Center on the States, says that after struggling for years with huge budget deficits, many states are seeing light at the end of the tunnel.

"We are seeing improvements — meaningful improvements — on the revenue side and states have cut costs significantly, so the fiscal situation is better in many cases," Urahn says.

'Unimaginable' Cuts

Of course, states like California and New York still have sizable deficits to plug. And states have achieved their new fiscal balance at a painful cost: Nearly 700,000 state and local government jobs have been lost since the recession.

There have also been big cuts in spending for education, health care and law enforcement, notes Nick Johnson of the Center on Budget and Policy Priorities.

"Some of the things that states are doing ... once would have been kind of unimaginable," he says. "The depth of cuts in funding for K-12 education, for instance, [has] been very significant and I think a lot of governors are recognizing it."

In states like Idaho and Virginia, Republican governors are calling for increases in funding for schools. Last year Florida Gov. Rick Scott tried to push through a corporate tax cut. This year, he wants $1 billion in new education spending.

Scott says Florida may have nice weather and great beaches, "but if Florida doesn't provide the intellectual talent to make our businesses competitive, we will become a footnote when this century's history is written."

Federal Budget Battles To Come

Florida can afford to spend more money on education because its high unemployment rate has ticked down. Urahn with the Pew Center says that as local economies improve, state tax revenues tend to increase. But she warns that most states aren't out of the woods yet.

"On average, states are still 6 percent below the amount of revenue that they were bringing in before the recession," Urahn says. "So yes, things are improving, but they're still at a considerably lower level than they have been for several years."

And there are big challenges looming. States get a quarter of their revenues from the federal government, which has budget problems of its own. After the debt ceiling standoff last year, Congress formed a committee to try to reduce the deficit. But it was unable to agree on a plan, triggering automatic spending cuts. Johnson, of the Center on Budget and Policy Priorities, says that will hurt states.

"The federal government is scheduled to make another round of very deep budget cuts in January of 2013. If those were to go forward, a very large chunk of those would directly hit state budgets in the form of cuts in grant programs," he says.

And because states pass a lot of money on to county and local governments, the federal cuts are likely to be felt throughout the economy. The hope is that the U.S. economy continues to improve and that the days of crippling budget deficits are at an end.

Copyright 2012 National Public Radio. To see more, visit


Exploring Life's Incurable Soiledness With The Father Of Italian Noir

A crackling new translation of Giorgio Scerbanenco's crime novel Private Venus has just been released. Critic John Powers read it in a single sitting.

Tasting With Our Eyes: Why Bright Blue Chicken Looks So Strange

The color of food can affect how we perceive its taste, and food companies aren't afraid to use that to their advantage. An artist tests perceptions by dousing familiar foods with unorthodox colors.

Holy Bible Could Become Louisiana's Official Book

Lawmakers have proposed a bill that would make the Bible the state's official book, but critics say it is unconstitutional and would open Louisiana up to legal challenges.
WAMU 88.5

Capital Bikeshare Supplier Bought, Reopening Door To Expansion

Bixi, the company that supplies bicycles and bike stations to the Capital Bikeshare program, has been rescued from bankruptcy. But does that mean the bike sharing will resume expansion in our area?

Leave a Comment

Help keep the conversation civil. Please refer to our Terms of Use and Code of Conduct before posting your comments.