NEWS RELEASE                                                     

February 10, 2003

Contact:  Marc C. Duff   (262) 782-0763

 

11 STATE BUDGETS IN CRITICAL CONDITION

 

Taxpayers Network today issued its first comprehensive look at the budget health of states, putting 11 in critical condition due to massive debt and almost zero savings to fall back on.

 

Recent reports by various groups fell short in portraying true state deficit situations because they failed to consider funds states have in reserve accounts, according to Taxpayers Network Executive Director Amy McGee Polasky. 

 

“Building reserves or rainy day funds to help during difficult times shows sound state fiscal management and a commitment to long-term financial security for its taxpayers,” Polasky said.  “This report rates a state’s budget health based on the size of its general fund shortfall, minus any budget reserves available.”

 

Healthy State List

Alaska

Delaware

South Dakota

Florida

Wyoming

New Mexico

 On the critical list are some of the nation’s most populated states, such as California, New York, Texas, New Jersey and Michigan.  California’s shortfall is the worst in the nation, exceeding $26 billion, or nearly one-third of its total state budget.  To address its deficit, California Governor Davis has proposed more than $8 billion in tax increases, along with shifting $5 billion in costs to local governments. 

 

Even some of the states listed as “healthy” by Taxpayers Network could have problems in the future.  Alaska and Florida were given negative outlooks by bond rating firms.  Wyoming and New Mexico are benefiting from a temporary revenue boon from natural gas production in their states.  Twelve states received a “stable” budget rating because adequate reserves kept their deficit to a manageable 5 percent of their total budget.  Most of the 21 states rated as “serious” have sizable shortfalls with only modest budget reserves.  The 11 states on the critical list have a projected shortfall of 15 percent or more of their state budget, after reserves are considered.

 

CRITICAL

STATES

FY2004

SHORTFALL

(millions)

BUDGET

RESERVES

(millions)

SHORTFALL MINUS RESERVES

(millions)

SHORTFALL

AS % OF

GENERAL

FUND BUDGET

California

$20,200

($4,451)

($24,651)

31.6%

New York

$9,300

$1,395

($7,905)

20.5%

New Jersey

$5,000

$110

($4,890)

20.5%

Oregon

$950

$0

($950)

20.4%

Minnesota

$2,775

($356)

($3,131)

20.3%

Wisconsin

$1,626

($373)

($1,999)

17.7%

Connecticut

$2,000

$0

($2,000)

17.2%

Michigan

$2,000

$0

($2,000)

17.0%

Maine

$475

$0

($475)

16.0%

Texas

$4,382

($800)

($5,182)

15.8%

Arizona

$1,000

$61

($939)

15.6%

 

Polasky said the report offers a detailed look at the “pain and agony” state legislatures and governors will face as they work to bail their states out of immense fiscal troubles. 

 

Watch List

Alaska

Florida

Hawaii

Tennessee

Washington

Virginia

Massachusetts

Ohio

The Taxpayers Network report also includes a “watch list” of eight states that have received negative outlooks from bond rating firms.  Firms use bond ratings to determine the financial risks of lending to a state.

 

“Overall, this report offers a warning to taxpayers as their states not only pursue spending cuts, but also look to higher taxes and fee increases to solve their budget problems,” she said. 

 

Polasky urged taxpayers to contact their state legislators and governors to encourage them to pursue comprehensive, long-term budget solutions. 


 

“New taxes, higher fees and band-aid ideas do not offer taxpayers the financial security they desire.  Taxpayers want and deserve structural changes that don’t increase the burden on family budgets and will endure the uncertain times that lie ahead for our nation,” she concluded.

 

            The Taxpayers Network is a non-profit organization whose mission is to educate the public about public policy issues.  The full report can be obtained at www.taxpayersnetwork.org.

 

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