- The Washington Times - Tuesday, February 4, 2003

DALLAS, Feb. 4 (UPI) — States are projecting a minimum of $68.5 billion in budget shortfalls in the next fiscal year and the crisis is worsening with every month, according to a report released Tuesday by the National Conference of States Legislatures.

State budget gaps have grown by 50 percent in the past two months and state leaders face closing at least a $26 billion shortfall in the current fiscal year that ends June 30 before they take on the nearly $70 billion shortfall projected in fiscal 2004.

"The magnitude of next year's budget gap is startling," said NCSL President Angela Monson, an Oklahoma state senator. "Thirty-three states estimate budget gaps in excess of 5 percent, with 18 of those facing gaps above 10 percent. There is great cause for concern since the deficit numbers continue to grow at an alarming rate."

Alaska, Arizona, California, Connecticut, Illinois, Kansas, Maine, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Jersey, New York, North Carolina, Oregon, Texas and Wisconsin are facing gaps of more than 10 percent in fiscal 2004. Alaska, California, Oregon, and Colorado face at least 10 percent gaps this fiscal year.

Two-thirds of the states must reduce their budgets by nearly $26 billion between now and June 30, which ends the current fiscal year in most states. In November, when NCSL issued its last report, states projected a cumulative gap of $17.5 billion.

The projection of at least a $68.5 billion budget shortfall for FY 2004 is sobering but it may only be the beginning. The NCSL said about a third of the states could not provide estimates for the survey, so more bad news may be coming as the year progress.

Corina Eckl, the NCSL's fiscal program director, said only three states appear to be in good financial shape in fiscal 2004: Arkansas, New Mexico and Wyoming. Wyoming and New Mexico benefited from accurate projections of oil revenues and Arkansas from a unique budget system.

Sluggish revenues are blamed for the budget shortfalls, according to the report. At least 30 states say revenue collections are below forecasts. Thirty-seven states say spending is exceeding budgets, with all but five reporting excessive Medicaid or healthcare costs.

"State budgets are under siege," the report states. "The faltering national economy, declines in the stock market, contractions in the manufacturing and high-tech sectors and soaring health costs have combined to undermine the stability of state budgets."

Medicaid spending has been cut in 13 states, higher education in 12, and nine states have cut elementary and secondary education and corrections spending. In addition, nine states have cut state employee travel and nine have laid off employees. Twenty-nine states have imposed across-the-board budget cuts.

At least 24 states reported the governor or a member of the Legislature has offered tax increase proposals to help eliminate the budget deficits. At least 14 states will consider higher cigarette taxes while another six will consider increased alcohol taxes.

Another concern among the states is unfunded federal mandates passed on by Congress.

Monson said state budget planners are concerned that the proposed federal budget for next year doesn't provide enough money to meet requirements of the No Child Left Behind Act, special education and election reform.

"We estimated that states are about $25 billion short on unfunded federal mandates," she said. "In addition states are still waiting on an agreement on the current fiscal year budget to be finalized, particularly on issues such as welfare reform and homeland security."

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