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Projected Alaska debt
Politics and Economy:
In the Red
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State Budget Crunch Overview

The majority of American states are facing a bleak fiscal future. According to a recent report from the Center on Budget and Policy Priorities, the total deficit numbers for fiscal year 2004 are expected to be somewhere between $60 and $85 billion.

But the trouble isn't new. During the last year 37 states had to reduce their budgets when revenues didn't meet costs. In November 2002, the National Conference of State Legislatures released their State Budget Update. The news was grim—only eight states reported a stable fiscal outlook and only two (Hawaii and Wyoming) are optimistic about next year's finances.

What's to blame for the situation? Some blame budget increases of the more prosperous late '90s, others tax cuts or rising healthcare costs. Then there are the costs of Homeland Security after September 11th. What's certain is that the country's economic downturn has reduced tax revenues. What makes the situation so serious is that almost all states are now facing the dreaded specter of raising taxes.

States have taken a variety of approaches during 2002 to balance their budgets, reducing Medicaid eligibility, instituting hiring freezes, delaying capital projects, shutting down state parks and furloughing non-violent felons. Districts in seven states have adopted four-day school weeks. A number of states were forced to tap into their rainy day funds. And eighteen states raised taxes by over 1 percent.

Just what do states spend their, and your, money on? Check below. And, find out how your state is faring fiscally.

State of the States

Total state spending in fiscal 2001:  $1 trillion
Percentage of spending on elementary and secondary education:  22.2%
Percentage of spending on higher education:  11.3%
Percentage of spending on public assistance:  2.2%
Percentage of spending on Medicaid:  19.6%
Percentage of spending on corrections:  3.7%
Percentage of spending on transportation:  8.9%

Sources: National Conference of State Legislatures "November 2002 State Budget Update"; National Association of State Budget Officers; Center on Budget and Policy Priorities

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