More States On Brink

California is hurtling into the budgetary abyss — and it’s not alone.

Across the nation, state tax collections in the first three quarters of 2009 posted their steepest decline in at least 46 years, according to a report this month from the public policy research arm of the State University of New York.

At least 30 states raised taxes in their most recently completed fiscal year — which ended in most cases in mid-2009. Even more cut services. All told, states raised $117 billion to fill last year’s budget gaps, the Pew Center on the States estimates.

Yet despite all those new taxes and deep cutbacks, pressure on state finances continues to build. Economists warn that without a new round of federal stimulus spending, states could face another round of layoffs that could kneecap an already shaky economic recovery.

“We could see a real ripple effect if the states don’t take a balanced approach” by balancing cutbacks with tax raises and other new revenue, said Jon Shure, deputy director of the state fiscal project at the Center on Budget and Policy Priorities in Washington.

State and local governments have cut 132,000 jobs since August 2008, the center says. Fiscal problems appear most acute in California, whose general obligation bonds were downgraded this week after Gov. Arnold Schwarzenegger declared a fiscal emergency.

The state has already said it will increase tuition by a third in the University of California system, among other cash-raising moves. At one point, it was projected to spend nearly 50% more than it stands to garner in revenue in this fiscal year, by one count. California has asked for federal help and warned it could run out of cash in March.

And California’s not the only state facing an almost unfathomable shortfall. Like California, Arizona and Illinois face budget gaps above 40% of projected general fund spending, according to Pew data.

continues … more-and-more-states-on-budget-brink: Personal Finance News from Yahoo! Finance.

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