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George Mehaffy on 04 Jun 10Executive Summary Fiscal 2010 presented the most difficult challenge for states' financial management since the Great Depression and fiscal 2011 is expected to present states with similar challenges. The severe national recession that most likely ended in the second half of calendar year 2009 has drastically reduced tax revenues from every revenue source. As state revenue collections historically lag behind any national economic recovery, state revenues will remain sluggish throughout fiscal years 2011 and 2012. State general fund spending has been so negatively affected by this recession that both fiscal 2009 and fiscal 2010 saw declines in state spending. This two year decline is unprecedented and is only the second time that state general fund spending has declined in the history of the Fiscal Survey. Forty states decreased their general fund expenditures in fiscal 2010 compared to fiscal 2009. According to governor's recommended budgets for fiscal 2011, 13 states recommended lower general fund expenditures compared to fiscal 2010. In total, 44 states estimate that they will have lower general fund expenditures in fiscal 2010 compared to fiscal 2008. In fiscal 2011, 39 states recommended lower spending than in fiscal 2008. Fiscal 2008 serves as a baseline as it the last fiscal year on record in which states were not significantly affected by the national recession.