Report: States in deep financial trouble, even if economy recovers

Updated

State budgets across the country will stay in crisis without major structural reforms, according to a new report from the State Budget Crisis Task Force. In a study of six major states—California, Illinois, New Jersey, New York, Texas, and Virginia—the economic study group identified what they called “six major fiscal threats,” including “eroding tax bases,” rising Medicaid costs, and decreased federal spending levels.

Despite this, various states have rejected or are considering rejecting funds from the federal government to expand their Medicaid programs. Norm Ornstein of the American Enterprise Institute has said that rejecting the expansion program will not help reign in Medicaid costs; in fact, he says, “It’s going to cost the state money.”

The consequences have already been severe. As Lean Forward has reported in the past, cash-strapped states and cities have been reducing their debt burdens through a wave of privatization and devastating cuts: Scranton, PA’s mayor has slashed public employees’ salaries to minimum wage, various cities are selling ad space on public goods to corporations, and some cities are even saddling the perpetrators of minor misdemeanors with crushing debt, then outsourcing the debt collection to private companies.

The full Task Force report can be read here. The New York Times also has a longer article on the study.

Report: States in deep financial trouble, even if economy recovers

Updated