The United States is facing the gravest financial crisis in at least a generation. And while all levels of government are affected, the fiscal pain is felt most acutely by states. As we go to press, most states are in recession and facing significant budget shortfalls. The economic downturn is increasing demand for state services at the very time that the revenues that pay for those services are in free fall. The list of problems is familiar to anyone who reads the newspaper. Record job losses are spurring increased demand for safety net programs like food stamps and unemployment compensation. Many states’ unemployment trust funds are close to insolvency. Shrinking incomes are projected to increase state Medicaid spending upwards of five percent in Fiscal Year 2009—while overall state general funds are declining. And perhaps most unsettling, no one can predict when the economic situation will begin to improve—or stop getting worse.
States’ response to this crisis is critical to the nation’s overall economic and fiscal health. Some economists warn that deep state spending cuts in times of crisis can prolong downturns by increasing stresses on citizens. Others warn that raising taxes could stifle economic activity in the private sector. But states that make sound policy decisions will play a vital role in stabilizing the effects of recession and engineering a turnaround that benefits the entire nation now and in the future.
Helping states improve budget practices is a national imperative. Trade-off Time: How Four States Continue to Deliver shows how tough economic times can be a crucible forging better decision making and a heightened vigilance to ensure every precious tax dollar delivers maximum value for the public. This report features four states—Indiana, Maryland, Utah and Virginia—that are leaders in measuring the performance of government programs. And by using those measurements to drive smart budget cuts and new spending they are creating the foundation for a better economic and fiscal future.