Nationwide, bleak financial news

Last update: April 24, 2008 - 8:48 PM

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nationwide, bleak financial news

The latest: The finances of many states have deteriorated so badly that they appear to be in a recession, regardless of whether that's true for the nation as a whole, a survey of all 50 state fiscal directors concludes. The situation looks even worse for the fiscal year that begins July 1 in most states.

The conclusion: "Whether or not the national economy is in recession -- a subject of ongoing debate -- is almost beside the point for some states," said the report by the National Conference of State Legislatures (NCSL).

Hitting pocketbooks: The weakening economy is hitting tax revenue in a number of ways: People's discretionary income is being gobbled up by higher food and fuel costs, while the tanking housing market means people are spending less on furniture and appliances.

From Delaware to California: The situation is grim in Delaware, with a $69 million gap this year, and bleak in California, with a projected $16 billion budget shortfall over the next two years, the report said.

By mid-April, 16 states and Puerto Rico were reporting shortfalls in their current budgets as the revenue those budgets were built on -- typically, taxes -- fell short of estimates. That's double the number of states reporting a deficit six months ago.

Tapping emergency funds: Many states, including Minnesota, plan to tap their rainy day funds, which contain money set aside for fiscal emergencies.

What's expected? The NCSL said the news is even worse for the upcoming fiscal year, with 23 states and Puerto Rico already reporting budget shortfalls totaling $26 billion. More than two-thirds of states said they are concerned about next year's budgets.

The results are consistent with a drumbeat of bad economic news for states that several budget groups have produced in the past few months.

ASSOCIATED PRESS

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