Fiscal Review of US States

A recent report by the National Governors Association and the National Association of State Budget Officers lays out the precarious state of the finances in US State governments.

The report makes the case that US states are currently facing one of the worst, if not the worst, fiscal periods since the Great Depression. During 2009 their respective fiscal conditions significantly deteriorated and the trend is expected to continue into the next three fiscal years. Tax revenues from every source are down and demands on state programs is significantly increased as a result of the recession. Unlike Canadian provinces, US States are not allowed to run a budgetary deficit. They must enact either spending cuts or increase tax and must balance every year.

The increase in expenditure pressures for mandated programs such as Medicare and Medicaid as well as the increased demand for social services as a result of the significant increase in unemployment will mean that US States will continue to struggle to balance their budgets. Obviously each individual state has its own particular struggles, with California the one getting the most press given the fiscal mess that they are in. Can you imagine a Canadian province issuing "IOU's"?

Between the fiscal mess at the US Federal Government level and the struggles at the State level, it seems that only a miracle will resolve the fiscal issues facing the US. Let's hope for one, because the alternative for the world economy and in particular the Canadian economy are too gruesome to contemplate. (Sorry to be gloomy, I guess the February blahs have kicked in!)