U.S. States Face $40B in Deficits in ’13: Survey

U.S. states must tackle at least $40 billion in budget gaps in the year beginning in July as federal stimulus funds decrease and expenses rise, according to a survey released today by the National Governors Association and the National Association of State Budget Officers.

Not all states have made forecasts for that year -- only 17 made deficit predictions -- and most are still grappling with shortfalls for fiscal 2012, which total $95 billion, the groups said. Revenue, while improved in 2012, won’t meet costs in areas such as health care and prisons, the report said.

“Growth is weak and there is not enough money for all of the bills coming in,” saidScott Pattison, executive director of the budget officers group, in a statement. “State officials will still be cutting some programs, and increases in funding for any program except for health care will be rare.”

So far in the fiscal year, 15 states are seeing revenue outpace estimates, 22 states are in line, and seven are recording lower-than-expected collections. The national economy may harm revenue collection, the survey said.

States are also limiting their flexibility by letting tax increases expire, according to the paper. Their budgets reflect a decrease of $2.6 billion in levies and fees, the report said.

Officials will have less room to maneuver in emergencies, with reserves, deemed by the groups as a “crucial tool,” making up 6.2 percent of expenditures in fiscal 2012, compared with 12 percent in 2006.

To contact the reporter on this story: Romy Varghese in Philadelphia at rvarghese8@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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