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Texas among two-thirds of states facing budget challenges

🕐 16 min read


The $4 billion that lawmakers left unspent after their last session two years ago appears to have evaporated. Now Texas could be as much as $6 billion short of the money needed just to keep the status quo for the upcoming two-year budget cycle, according to budget experts. Republican state Rep. Drew Darby said spending cuts are now certain. Texas has not been forced to make budget cuts since 2011, when a much bigger shortfall amid the Great Recession resulted in lawmakers cutting $5.4 billion from public schools.


The Legislature is looking at a budget hole estimated to be about $868 million, or about 12 percent of state spending, for the upcoming fiscal year. The shortfall is largely the result of plunging oil and natural gas prices, but it also stems from tax cuts and various subsidies put in place for businesses and industries, including oil and gas companies. Last year, lawmakers closed a projected $1.3 billion shortfall in the current fiscal year by making cuts to state agencies, tapping into reserves and other actions.


Louisiana has had repeated budget shortfalls for the past nine years caused by declines in oil and gas prices, tax cuts and the continued use of patchwork fixes to fill gaps rather than long-term budget corrections. The current deficit is projected at $313 million, as tax collections and other sources of state revenue continue to be lower than projected. A special session is expected in mid-February to close the current year gap.



Alabama is not expecting a budget shortfall at the moment, but there is more uncertainty surrounding the next fiscal year in a state that regularly lurches from one budget crisis to another. Many lawmakers expect to have trouble putting together a budget and meeting funding requests from state agencies. Adding to the uncertainty is what effect federal actions on Medicaid funding and a possible repeal of the Affordable Care Act will have on the state budget.



Alaska’s current budget shortfall is estimated at $3.1 billion, with a projected $2.7 billion gap for the fiscal year that starts July 1. Depressed oil prices are the main reason for the shortfalls. State labor economists said last fall that Alaska had entered a recession, although its severity is too early to gauge. Lawmakers remain split on how much of the earnings from the state’s oil-wealth nest egg might be used to help close the gap and whether new taxes are needed.



Arizona has not projected a shortfall for the current fiscal year or for the upcoming one. The Legislature’s budget analysts expect a surplus of about $24 million will be available for new initiatives next fiscal year, but Republican Gov. Doug Ducey’s budget proposal showed a surplus of more than $110 million. Ducey has proposed a $9.8 billion spending plan. It would include $114 million for K-12 initiatives, including teacher pay raises and free tuition for prospective teachers.



Arkansas has not projected a shortfall for the current fiscal year or for the coming one. Although the state’s net available revenue for this year is $8.8 million below forecast, state finance officials have said they expect the state to meet its forecast.



California has not projected a shortfall for the current fiscal year, but Gov. Jerry Brown is warning of a potential $1.6 billion budget shortfall for the next one. The projection is a stark contrast with the forecast released in November by the Legislature’s nonpartisan budget expert, who projected a surplus as high as $2.8 billion. Brown’s administration says California’s three biggest income sources — personal income taxes, sales taxes and corporate taxes — are below projections.



Colorado has no current shortfall, but Gov. John Hickenlooper is projecting a $500 million gap for the coming fiscal year due largely to a constitutional requirement for the state to issue taxpayer refunds whenever revenues surpass limits linked to inflation and population growth. Hickenlooper proposes closing the gap with a variety of steps, including only partially funding K-12 education and cutting transportation spending.



In Connecticut, state Comptroller Kevin Lembo has projected the current fiscal year to end with a $56.2 million shortfall. The main reasons are lower-than-expected revenue from the state’s personal income and sales taxes, and less money than expected coming from the federal government. Meanwhile, sluggish revenue growth and increased pension contributions are creating a shortfall of about $1.5 billion in the upcoming fiscal year. Last year, more than 1,000 state workers were laid off. It’s unclear whether there will be more job cuts this year.



The panel that sets Delaware’s official revenue estimates downgraded its outlook for the current and upcoming fiscal years due largely to lower expectations for corporate income taxes. State budget officials have suggested the projected shortfall for next fiscal year is about $350 million.



Tax revenue is projected to grow about 4 percent this year and next. But little money will be left over if the Legislature accounts for normal growth in its spending plan. A long-range outlook released in September projected only a $7 million surplus for the current fiscal year. That prompted legislative leaders to suggest cutting other parts of the budget to pay for new spending initiatives.



Georgia does not have a budget shortfall and is not projected to have one for the coming fiscal year. So far, tax revenue has increased 4.8 percent compared to the same period a year ago. Gov. Nathan Deal has proposed $606 million in new spending for the remainder of the current fiscal year. His proposed state budget for the next fiscal year contains nearly $25 billion in total spending — an increase of 3.6 percent over the current year’s budget.



In Hawaii’s $28.5 billion two-year budget, Gov. David Ige proposed spending $301 million more in the current fiscal year than the state expected to take in and $173 million more in the coming fiscal year. A revenue projection after Ige submitted his budget suggests the shortfall could be greater. Ige’s plan calls for filling the gap with a carry-over balance from previous years. State leaders say the growing cost of post-retirement benefits for public employees, Medicaid and health care are contributing to the shortfall. Lawmakers say they might reduce portions of Ige’s spending plan.



Idaho does not have a budget shortfall and is not projected to have one for the upcoming fiscal year. Gov. C.L. “Butch” Otter has proposed a 4.6 percent spending increase, roughly $189 million, for the upcoming fiscal year. This includes increasing public school funding by 6.4 percent, or by $104 million; raising the college and university budget by 2.1 percent, or by $6 million; and bumping the community college budget by 3.4 percent, or roughly $2.1 million more.



Illinois is projecting shortfalls of $5.3 billion for the current fiscal year and $7.1 billion for the following fiscal year as an 18-month budget stalemate continues between Republican Gov. Bruce Rauner and Democrats who control the Legislature. State government has functioned largely because of court-ordered spending on social services and periodic appropriations by lawmakers. The state has struggled since a temporary increase in the income tax was not renewed in the weeks leading up to Rauner’s inauguration, largely because the incoming governor opposed it.



Revenue collections for the current fiscal year are about $300 million below projections, due mostly to lower-than-expected sales tax collections. GOP lawmakers are currently pushing a plan to increase gas taxes and implement a new registration fee for motorists to help pay for infrastructure improvements. The most recent revenue forecast shows the state’s revenue is expected to climb about 2 percent over the next two years.



Outgoing Gov. Terry Branstad has directed state agencies to make cuts to plug a roughly $110 million shortfall in the current $7.2 billion budget. The state is not projecting a shortfall for the following fiscal year.



Kansas has a current shortfall of about $342 million and a projected shortfall of $583 million for the upcoming fiscal year. The state has struggled to balance its budget since Republican legislators slashed personal income taxes at the urging of Gov. Sam Brownback, in what many voters have come to see as a failed experiment to boost the economy. The state also is struggling with a slump in agriculture and energy production.



State budget officials are working to update current projections. Last October, they projected a $42.4 million surplus for the current fiscal year and expect revenue to meet projections for the following fiscal year. It remains to be seen whether those revenue projections will meet any increases in state spending needs.



Maine is running a revenue surplus of $49 million so far this fiscal year and is not projecting a shortfall for the upcoming fiscal year. In his two-year budget plan, Gov. Paul LePage has proposed reducing the state’s income and corporate taxes while cutting about 500 state jobs and repealing the existing state education funding formula.



Maryland lawmakers will be working to close a current shortfall of about $209 million and a projected shortfall of about $544 million for the upcoming fiscal year. Lower-than-expected tax revenue, as well as spending growth in the Medicaid program and formula mandates, have worsened Maryland’s fiscal outlook. Lawmakers have warned that cuts will be needed to close the gap.



Republican Gov. Charlie Baker projected a nearly $300 million shortfall in the state’s current $39 billion budget, prompting the state to give buyouts to about 900 state workers and trim agency spending by $100 million. The nonpartisan Massachusetts Taxpayers Foundation projects the state faces an $800 million structural deficit for the fiscal year starting July 1. Key issues include lower-than-anticipated tax collections and an unexpected surge in Medicaid enrollment, which state officials partly attribute to a drop in small business owners offering their employees insurance.



Tax revenue is expected to grow by about 2.8 percent this fiscal year and 2.5 percent in the next. The state is projected to have an extra $330 million that is not already accounted for in the upcoming fiscal year. But officials have cautioned that job gains could slow, and there is uncertainty over what policy changes could be coming under President-elect Donald Trump.



Minnesota has been operating with a surplus for the current fiscal year and is projecting that will continue for the upcoming one. A key priority will be crafting a plan to help residents who buy individual coverage through the state-run marketplace but make too much to qualify for federal subsidies. They are facing massive health insurance premium hikes this year. The GOP’s plan would dole out nearly $300 million in state support based upon income, which would be capped for those making eight times the poverty level.



The current shortfall is about $115 million, which is 1.8 percent of the state-funded portion of the nearly $6.4 billion budget. The biggest portion of that is $89 million for Medicaid. Lawmakers have not said when they expect to consider fulfilling agencies’ requests for money to cover the shortfalls or where they would find the money. One option would be to take it from cash reserves. An early projection for the next fiscal year, which begins July 1, shows a 3 percent reduction in the state budget.



Without more cuts, Missouri is expected to end the current fiscal year about $40 million in the hole and could be on the path to a nearly $460 million shortfall next fiscal year. Former Democratic Gov. Jay Nixon already cut more than $200 million in spending this fiscal year. Newly elected Republican Gov. Eric Greitens has said he plans additional spending cuts, although he has yet to provide details. The shortfall is caused partly by a greater than 25 percent decline in corporate income tax revenue.



The state has seen a decline in revenue from energy production and lower-than-expected tax collections from individuals and corporations. State spending is running about $100 million higher than revenue. Legislative fiscal analysts expect that trend to continue during the next two-year budget cycle, which begins July 1, unless lawmakers make changes. Deep spending cuts or new sources of revenue are among their options.



Previous tax cuts and declines in commodity prices that have lowered farm incomes and hurt other sectors have reduced tax revenue. The state has a $267 million shortfall and faces additional budget gaps through June 2019. Gov. Pete Ricketts has proposed tapping state reserves and cutting spending.



Revenues are slightly outpacing projections with the current, two-year budget cycle set to end June 30. Revenue collections are expected to grow by an additional $541 million over the next two fiscal years, although current funding requests from state agencies would exceed that amount by between $300 million and $600 million. The Sandoval administration is not bound to agency requests and will be issuing its budget proposal on Tuesday.



Revenue for the current fiscal year was about $41 million ahead of projections in December, but a portion of the money is designated for reserves and much of the rest may be used to cover a shortfall in the Department of Health and Human Services.



No shortfall has been projected for the current fiscal year.



The state expects a $69 million shortfall in the current fiscal year, representing about 1 percent of general fund spending. Tax revenue is projected to fall by an additional $100 million next year, as lawmakers consider cuts to take-home pay for 80,000 agency employees and teachers. A prolonged downturn in the oil and natural gas markets has rippled through New Mexico’s economy.



Budget forecasts project a $689 million general fund gap in next year’s budget. That figure assumes lawmakers and Gov. Andrew Cuomo will already have cut spending by $2.8 billion to meet a goal of holding spending increases to 2 percent or less. Overall state revenue is projected to increase next fiscal year, but the gains are expected to be overshadowed by big increases in spending on education and Medicaid. The state’s overall budget for the current year is $156 billion.



North Carolina currently is on track to have a budget surplus. Through October, revenue collections were $191 million above expectations. Fiscal analysts attribute the higher collections primarily to more income tax withholdings as the job picture improves.



Lawmakers addressed a shortfall of about $1.4 billion during the current two-year budget cycle by tapping into the state’s rainy-day fund and making large cuts to most state agencies. Former Gov. Jack Dalrymple presented a budget in December that was about $2 billion less than what was proposed two years ago. It relied on cuts to the state workforce and higher education. The state’s tax collections have been shrinking as a result of a decline in crop and oil prices.



Revenue for the next two-year budget cycle is $621 million behind projections. While that’s just 3.5 percent of anticipated spending, Republican Gov. John Kasich has warned lawmakers the state could be on the brink of a recession. Both the state’s income tax revenue and collections from the state’s primary tax on business activity are lagging estimates. Ohio has $2 billion in its rainy-day fund, but Kasich has no current plans to use the money.




The state has not seen a shortfall for the current fiscal year but has projected a $1.7 billion gap for the upcoming two-year budget cycle. Gov. Kate Brown has said cuts will be needed. She proposes closing a loophole that allows many businesses to avoid paying corporate income tax, increasing taxes on hospitals and insurance companies, and boosting tobacco and liquor taxes. Officials attribute the strain to rising health care costs, an unfunded state pension liability and ballot measures allocating funds for career and technical education.



State officials have projected a $600 million shortfall in the current fiscal year. Lackluster tax collections are partly to blame. The $31.5 billion approved budget also relies on borrowing $200 million from a surplus in a state medical malpractice insurance fund, tax delinquents paying $100 million in back taxes and reaping $100 million from licensing fees on online casino gambling, which is not even legal yet in Pennsylvania. Meanwhile, the Legislature’s nonpartisan Independent Fiscal Office has projected a $1.7 billion deficit in the fiscal year that will start in July, driven primarily by higher costs for pension obligations, prisons and medical care for the poor.



State officials are projecting a $58.7 million surplus for the current fiscal year but are expecting a $112 million budget shortfall for the following year. Increases in education funding, Medicaid and other health care expenses are driving the expected shortfall. Gov. Gina Raimondo has said the state cannot afford to cut education but might have to trim social service and health care spending.



South Carolina’s economic advisers are projecting a total surplus of more than $450 million for the upcoming fiscal year. The state’s general fund is expected to grow by 4 percent over the current fiscal year.



State officials have projected a shortfall for the current fiscal year of about $26.1 million, which was about 1.6 percent of the total general fund budget of roughly $1.6 billion. The decline has been spurred largely by lower-than-expected sales tax collections, which officials have attributed to cautious consumer spending, low commodity prices and e-commerce transactions that avoid sales tax.



State officials have projected a $500 million surplus for the current fiscal year. For the upcoming year, revenue is projected to grow between $763 million and $878 million.




State officials are projecting a combined surplus of $287 million for the current and upcoming fiscal years.



Officials project a $50 million gap between revenue and current spending needs in the coming fiscal year. Newly elected Gov. Phil Scott has yet to propose his budget plan.



Virginia has an estimated $1.3 billion shortfall for fiscal years 2016 through 2018, driven largely by lower-than-expected income and sales tax collections. The budget woes have forced Gov. Terry McAuliffe to scrap planned pay raises for state employees and teachers. To close the gap, the governor has proposed a 5 percent cut in state funding for public colleges and universities, among other possibilities.



Lawmakers closed an estimated $2 billion shortfall in the two-year budget cycle that ends June 30, primarily through suspending a school class-size initiative. Over this time, projected revenue collections have increased nearly $1.7 billion and the state has had about $200 million in other savings. State officials are now projecting a surplus of $943 million. Lawmakers, however, will be facing a projected shortfall of about $1.5 billion for the upcoming, two-year budget cycle due to a court mandate on public education funding. If an alternate funding source isn’t found, the state is expected to tap into its emergency fund, which has more than enough to cover the expense.



Revenue is running about $98 million below estimates six months into the current fiscal year. Declines in personal and corporate income taxes, sales taxes and severance taxes on extracting coal, oil and natural gas are to blame. Outgoing Gov. Earl Ray Tomblin has ordered a 2 percent cut for most state agencies and has proposed raising the consumer sales tax 1 percent. The state is predicting a $400 million budget shortfall for the upcoming fiscal year. Gov.-elect Jim Justice has spoken against raising taxes and making large cuts.



Lawmakers closed a $2.2 billion shortfall for the current, two-year budget cycle that ends June 30, but face a projected $693 million shortfall in the next budget. The shortfall is based on state agency budget requests, which always exceed what the governor ultimately includes in his two-year spending plan that will be released in early February. The two biggest drivers of the increase in state agency spending requests are the Department of Public Instruction’s request for an additional $508 million for K-12 school funding and the Department of Health Services’ request for $450 million to continue current Medicaid service levels.



To address a steep decline in revenue from coal, oil and natural gas production, Wyoming has made more than $300 million in cuts since the state’s current two-year budget was approved last year. Officials warned in October that revenue would still fall $156 million short of covering spending. Meanwhile, the state also is facing a projected annual shortfall of $360 million in public school funding beginning in fiscal year 2019 as billions of dollars in school construction and maintenance funding is drying up amid a halt in federal coal leasing.


Associated Press reporters around the country contributed to this report.

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