NCPA - National Center for Policy Analysis

States Try to Close Budget Gap without Raising Taxes

June 28, 2011

As 2011 began, more than half of the states saw more tax revenues come in than they had anticipated, a small but significant dividend from a gradually improving economy.  California discovered an additional $6 billion in tax revenues that it hadn't counted on.  In New Jersey, the windfall was more than $900 million; in Michigan it was $429 million.  The extra cash helped ease the sense of emergency.  But it wasn't enough to save most states from the budget reckoning they anticipated, says Pamela M. Prah, a Stateline staff writer.

  • Twenty states had virtually no money in their rainy day funds.
  • That meant those states this year essentially had to choose between making big spending cuts or raising taxes -- or some combination of those two -- to balance their budgets.
  • By and large, they've chosen spending cuts.
  • Some 13 governors and 1,262 state legislators -- a record number of both -- have signed a pledge not to raise taxes.
  • For many of them, the imperative to close budget gaps represented not a crisis but an opportunity to realign state government around a smaller mission.

The result is budgets that contract state government to a degree never before seen in some capitals. 

  • Florida's budget spends $1 billion less than last year and $4 billion less than 2006.
  • New York closed its $10 billion deficit with $9.3 billion in spending reductions.
  • Arizona did away with a $1.5 billion shortfall with $1.1 billion in net spending reductions -- and no new taxes.

Source: Pamela M. Prah, "States Balance Budgets with Cuts, Not Taxes," Stateline, June 15, 2011.

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