Look Out for an "April Nightmare"

by Karl Kurtz

States, which already have closed $40 billion in fiscal year (FY) 2009 budget gaps, face at least an additional $97 billion they must close over the next 18 to 24 months, according to a national report issued today by the National Conference of State Legislatures.

NCSL said the news will pose difficult decisions for state legislators across the nation as they prepare for the 2009 legislative sessions.

"These budget gaps are approaching those seen in the last recession, which were the worst since World War II, and show every sign of growing larger," says William T. Pound, NCSL's executive director.

That's the bad news lead in the press release on NCSL's latest report on the fiscal condition of the states, State Budget Update: November 2008.

Enterprising reporter that I am, I journeyed the three feet from my office to that of Corina Eckl, the principal author of the report, to interview her about the "rest of the story."  Here's what she had to say:

Deteriorating revenues in nearly every state are the main culprit behind current state fiscal conditions.  Plunging consumer confidence, rising unemployment rates and increasing business failures all are contributing to shrinking state revenue.  In 15 states, severe revenue shortfalls are plaguing all major tax categories.   The shortages are particularly acute in states like Arizona, California, Florida, New York and Nevada. 

What makes the revenue news so distressing is that some collections do not even fully reflect recent crises in the financial services sector and deep declines in the stock market.  The full extent of the personal income tax breakdown won't be completely know until after the April 15, 2009 federal tax filing deadline.  Many states are bracing for an "April nightmare," a scenario not seen since the 2001 national recession.

Take a look at the spiffy new interactive maps of state fiscal conditions that summarize the results of the report.