State Budget Crisis

State budgets always fall out of balance during recessions, but in the current downturn states are facing the worst budget crunch since the Great Depression. Over the past two years, states have had to close budget gaps exceeding $300 billion. Many have raised taxes, but they've mainly dealt with the challenge by cutting spending. State workers are facing layoffs and unpaid furloughs. Social services, including health insurance for children, are being cut dramatically. Even normally sacrosanct areas such as K-12 education and public safety are taking hits. The federal stimulus package included fiscal relief for states, but that money will soon run out. And states expect to face continuing problems. Their revenues will grow more slowly than they've come to expect over the past 30 years, leading some observers to wonder whether states have to make fundamental changes in the scope and scale of the services they provide.