A Steep Decline

By Lawrence Hardy

As the 2009-10 fiscal year limps to a close, the “good” news on state budgets is that it could have been worse: The federal stimulus package kept many states and school districts from falling off a financial cliff, as programs and personnel were spared. The “bad” news, according to recent research, is that, as stimulus funds are rapidly spent, the cliff is approaching again.

Without the federal stimulus package, and the $140 billion it provided over two-and-a-half years to fund programs like health care and education, “we would have had a horrendous finish” to the past school year “and an even rougher start to 2009-10,” says Michael Griffith, chief financial analyst for the Education Commission of the States.

While the stimulus prevented widespread teacher layoffs and a “hemorrhaging of programs,” as Griffith describes it, the school year started off pretty roughly as it was. And because districts have burned through stimulus money much faster than expected, the fiscal outlook is only getting worse.

According to the Center on Budget and Policy Priorities (CBPP), 43 states and the District of Columbia cut services to help balance their fiscal year 2010 budgets. Twenty-eight states and the nation’s capital cut K-12 education, and 37 states cut higher education. Trying to keep from slashing those budgets further, a number of states already have burned through the stimulus funding despite warnings that it could lead to more dramatic cuts down the road.

Noting that the current recession “has caused the steepest decline in state tax receipts on record,” the report said new budget shortfalls have emerged in 41 states during the fiscal year. With nearly half of the governors submitting budget proposals for FY 2011, the center predicts that the budget gap for all states combined will reach $102 billion to $180 billion.

“We will go through all of 2010 and 2011 without seeing much help,” Griffith adds.

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