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They say tax revenues are drastically lower from all revenue sources, and collections are expected to fall further in the current year. Citing a $256 billion budget gap between FY 2009 and 2011, they've had to enact sharp spending cuts and find new revenue sources. The federal American Recovery and Reinvestment Act of 2009 (ARRA) made up $135 billion of the shortfall. Another $87 billion in Medicaid funding facilitated critical health and human services spending.
Even so, programs across the board were cut with more coming in 2010 as governors and budget officers prepare for the worst. According to NASBO Executive Director Scott Pattison:
"We expect a continued deterioration in all financial indicators including revenues, balances and expenditures."
As a result, the fiscal health of America's states is dire with little in the way of expected relief. Across the country, governors say federal stimulus money is running out, yet conditions are worsening so more spending cuts and revenue increases are planned at a time opposite measures are needed.
However, unlike the federal government, states must balance their budgets, making up shortfalls by borrowing, taxes, and/or cuts in vital services. While constitutional, statutory, or traditional practices vary, three general kinds of balanced budget requirements exist, differing only in detail:
-- the governors' proposed budget must be balanced;
-- the enacted one must be as well; and
-- the fiscal or biennium fiscal year one must be also, with no deficits carried forward.
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