The budget gap is dwarfed by last year’s $191 billion shortfall, but this is the first year since 2008 that states have to balance their budgets without federal aid. Stimulus under the American Recovery and Reinvestment Act, which pumped $137 billion into state budgets over the past three years, has essentially dried up for 2012. “Many one-time maneuvers to generate cash or delay expenditures have been used, so the budget gaps that have to be filled are now very real numbers,” says Harley Duncan, KPMG’s leader for state and local tax.
For taxpayers — already weary of rising tax rates and cuts to crucial services — the fiscal noose is tightening sharply as states resort almost entirely to deep spending cuts and tax increases to balance their budgets.
Lawmakers in about half of all states are still hashing out the details of their budgets, but so far, here is how things are shaping up:
• Education budgets are taking a beating in about two dozen states, requiring a drastic scaling back in programs in many cases, according to the Center on Budget and Policy Priorities. In South Dakota’s largest school district, for example, 10 percent cuts to K-12 education are tantamount to cutting all bus services, athletic programs and art programs. Education budgets are getting so lean in Mississippi, Missouri and Nebraska that they are breaching statutory funding formulas — yet further cuts are being negotiated this year. And for the third consecutive year in New York, education cuts are on the table despite a court order to increase funding to schools that need it most.
In Texas, lawmakers grudgingly cut about $1 billion in education funding over the past two years from its already below-average education budget, and now another $1 billion is getting axed for higher education, which is expected to cause some community colleges to close.
• About half of all states are cutting public health care, an area stretched thin by previous cuts in 31 states and a spike in Medicaid enrollment induced by high unemployment. Services for mental health, abused children, the elderly and the underinsured are the primary targets.
• Services to low-income families, already whittled down, will be cut even more. Funding for child care for working families is being targeted in California, Ohio, Louisiana, Georgia and Wisconsin.
California, Delaware, Michigan and the District are among the most recent to slash benefits to families living way below the poverty line. South Carolina, New Mexico and Washington made similar cuts early in 2011. About 1.3 million children are affected.