- The Washington Times - Wednesday, February 5, 2003

The already grim financial health of state governments is worsening, with tax revenues falling and budget gaps widening during the first half of the current fiscal year.
Most states are considering tax increases, as well as more cuts to bridge the difference between weak tax revenues and the money needed to run government.
But a report by the National Conference of State Legislatures concludes there is "no immediate end in sight" to severe budget troubles.
Among the dismal findings in the report, compiled from data collected during the first six months of the fiscal year that began July 1:
The collective budget shortfall for state governments jumped nearly 50 percent between November and January, rising from $17.5 billion to $25.7 billion, despite scaled-back spending plans.
Next year's projected shortfall is $68.5 billion, a nearly 40 percent jump from this year's estimate of $49 billion.
Thirty-six states reported gaps between income and spending; 19 states were missing money equal to 5 percent or more of their total budgets.
"The numbers are staggering," said Corina Eckl, head of the bipartisan conference's fiscal program. With estimates for 2004 incomplete for 11 states, the gaps probably will be even larger when final numbers are in, she said.
The report came a day after President Bush gave Congress his $2.3 trillion spending plan for the 2004 fiscal year starting Oct. 1. In response to the states' requests for more federal aid, particularly for Medicaid and new anti-terrorism initiatives, Mr. Bush proposed to give states more latitude in spending federal money for Medicaid, which provides health coverage for the poor, and for Head Start preschools in low-income neighborhoods.
His budget projects federal grants to state and local governments to rise nearly 4 percent next year to $398.8 billion, about 18 percent of the federal budget. More than $18 billion of the increase, however, is in mandated benefit programs such as Medicaid. For discretionary grant programs, Mr. Bush is asking Congress to cut what it appropriates for state and local governments to $154.1 billion, compared with $157.8 billion this year.
States already have taken sweeping actions to deal with their plight, from massive layoffs of state workers in Connecticut to early prison releases in Kentucky. To bridge budget gaps, many states used their rainy-day funds, others money from the nationwide settlement with the tobacco industry.
For all but four states, the 2003 fiscal year began in July. Twenty-nine states so far imposed across-the-board budget cuts, with eight states laying off workers. Others cut programs in elementary and higher education, Medicaid and corrections.
Projections for tax revenues, the fuel that runs state programs and services, were too high in at least 30 states, even though all scaled them back as the economy worsened.
Next year promises to be worse, the report found. Again, 36 states reported they expect a shortfall next year, and half of them said it would equal at least 10 percent of their budget.
The problems stretched nationwide. In California, a conservative estimate of next year's gap equaled 30 percent of the budget; in New Jersey, the budget shortfall equaled 18.5 percent. Minnesota's is 15 percent.

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