NCPA - National Center for Policy Analysis

Facing Grim Budget Outlooks, States Turn to Washington for Help

October 12, 2001

In a move perhaps without precedent, states are pleading with the federal government for radically new forms of assistance as they watch revenues plunge.

  • Last week, the nation's governors and legislatures asked for increased federal spending on roads, airports and railroads to help create jobs.
  • They want the feds to lift requirements for state matching funds on federal programs -- and to extend unemployment and health benefits for people who lost jobs or coverage as a direct or indirect result of last month's terrorist attacks.
  • Some governors are renewing calls to Congress to give states the authority to collect sales taxes on catalogue and Internet purchases.

Even after a round of budget cuts in recent weeks, state after state is finding that those may not be enough. States which only months ago were planning to splurge on sports stadiums now face serious declines in sales tax revenues as consumers stay away from stores, and falling income tax revenues as unemployment mounts and the stock markets fail to live up to expectations.

  • Many states -- like Ohio, Georgia, Arizona and Kentucky -- are looking at deeper budget cuts, hitting programs like mental health, Medicaid, prisons and education.
  • Several states -- like Connecticut and Kansas -- say they are likely to raise taxes or halt plans to cut them.
  • In Georgia, Colorado and other states, public colleges and universities are facing sizable cuts in many areas -- including student aid, staff and new building.

Source: Pam Belluck, "First Round of Budget Cuts Aren't Enough, States Find," New York Times, October 12, 2001.

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