Plunging Revenue Causes New Problems

A wave of states that had balanced budgets earlier this year are facing new or widening shortfalls as May and June tax revenue collections are declining more than expected.

In recent days, officials in Colorado, Hawaii, Iowa, Kansas, Maryland, Massachusetts, New York, Oklahoma and Virginia have reported that declines in sales, income and business tax receipts will knock their budgets out of balance. Georgia and Utah officials are awaiting new revenue estimates any day, but say they could be dealing with budget gaps.

More states could have the same problem as the summer goes on, specialists say. May and June are the last two months of the 2009 fiscal year for most states, so officials will have to cover those new gaps as well as the shortfalls they are already projecting for the 2010 fiscal year that began July 1. Governors can do that through executive orders or legislatures can take action when they next meet. The solution  usually is some combination of spending cuts, tax increases or dipping into reserves.

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