Expect state budget woes to continue

Pay raises take a cut

TEXT OF STORY

BOB MOON: In 46 states, July 1st means ringing in a new fiscal year and this is anything but a happy new year. Nearly all the states have cut programs to deal with huge budget shortfalls. And Marketplace's Mitchell Hartman reports the pain is not nearly over.


MITCHELL HARTMAN: The recession has punched a $166 billion hole in state budgets nationwide. The feds have made up nearly half of that with stimulus money. States have cut services and laid off employees. They've dipped into reserves. And 25 have raised taxes. Brian Sigritz is with the National Association of State Budget Officers.

BRIAN SIGRITZ: States that were very hesitant to even look at tax increases are being forced to at least consider it.

He says legislatures are worried about a voter backlash, so they're treading carefully.

SIGRITZ: They're hesitant to do the broad-based tax increases, increasing sales tax, personal income tax. So instead they might be willing to increase things like cigarette taxes or increase fees.

But Sigritz says whatever states have already done, it's probably not enough because their revenue just keeps falling.

SIGRITZ: A lot of states throughout fiscal 2010 are going to have to come back and look at cutting the budget again.

At least until the economy turns around and tax collections revive.

I'm Mitchell Hartman for Marketplace.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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