North Dakota and Montana Are Only Two States That Didn't Have to Deal with a FY 2010 Deficit
It isn't just California that is trying to cope with a large budget deficit.
Sure, California is getting the most press (and why not, California is a huge contributor to the GDP of the entire nation), but many other states are trying to clean up their own fiscal messes right now as well.
The reason for the sudden surge in states that are facing a shortfall in their budget for the coming year? A plunge in revenues.
Increased unemployment numbers means less personal income tax revenues. Decreased company profits means decreased corporate income tax revenues.
Why don't these states just borrow money like the federal government does?
Well, most states are prohibited from doing so. Most states have rules that dictate that they must not run at a deficit.
This means that they can do one of three things to close their budget gap - raise taxes, cut spending or draw down from available reserves.
The Catch 22? Cutting spending and raising taxes doesn't exactly create an ideal environment for economic growth.
Anyways, a total of 48 states were facing a deficit for their upcoming budget year.
Some states, including California, have not yet addressed the shortfall.
In addition, "at least" 29 states are anticipating another deficit for the 2011 fiscal year.
If you had to guess, which two states do you think are NOT facing a deficit for the fiscal 2010 year?
The answer: North Dakota and Montana.
Not a surprise, especially when you consider that these two states currently have two of the lowest unemployment rates in the country.
Every other state in the United States is currently dealing with a budget shortfall.
Some of these states have been able to deal with the problem fairly easily, while others (such as California) have plenty of work to do.
Filed under: The Economic Meltdown