Fiscal 2008 marked a turning point for state finances with a significant increase in states seeing fiscal difficulties, in stark contrast to the preceding several years. As the economy has weakened, so has the state revenue and spending picture. The decline of the housing sector along with a weak manufacturing sector have combined to cause significant declines in revenue for a number of states.
- Thirteen states were forced to reduce enacted budgets in fiscal 2008. This is in stark contrast to the three states that had to reduce their enacted budgets in fiscal 2007.
- Eighteen states assume negative budget growth for fiscal 2009 governors’ recommended general fund budgets, while four states are estimating negative growth budgets for fiscal 2008.
- Medicaid spending from state funds is estimated to increase by 4.4 percent in governors’ recommended budgets for fiscal 2009; more than four times the rate of growth for the overall general fund. This increase in health care spending continues to place pressure on state budgets by exceeding overall spending.
- Six states are recommending increases to their fiscal 2009 cash assistance levels under the Temporary Assistance for Needy Families (TANF) program, ranging from 0.1 percent to 30 percent.