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States continue to struggle with budget shortfalls.

Despite hopes that the worst economic recession since the Great Depression would end quickly, the U.S. economy continues to struggle and its effects are still being felt throughout all 50 states. Unemployment rates at 10 percent in some states, decreased sales tax revenues, decreased income tax revenues, and increased costs have combined to create gaping budget holes.

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Unlike the federal government, states are not permitted to run budget deficits. They must balance their budgets prior to the start of their fiscal year. Budgets are balanced according to projected revenues and projected costs, and fluctuations in actual revenue and expenses can severely alter the financial outlook for the states.

In order to reconcile a collective $158 billion in revenue shortfalls prior to the beginning of the FY2010 business cycle, 48 states employed a strategy of spending cuts combined with tax and fee increases. Despite efforts, 41 states are facing $38 billion in new revenue shortfalls this fiscal year.

Funding from the economic stimulus package has provided temporary relief for states. States have been able to fill 30 to 40 percent of their budget deficits with money from the $787 billion economic stimulus package. However, of the roughly $250 billion of the stimulus package set aside for states, most will have been distributed by the end of 2010, which will only cover about 20 percent of state budget shortfalls for 2011.

Total shortfalls for states in 2010 and 2011 are likely to reach some $375 billion.

IREM will continue to monitor the national fiscal condition and advocate for fiscal policies that are in members' best interests.
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Comment:States continue to struggle with budget shortfalls.
Publication:Journal of Property Management
Article Type:Brief article
Geographic Code:1USA
Date:May 1, 2010
Words:267
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