Many state and local governments are facing the biggest budget challenges in their histories. According to the Center on Budget and Policy Priorities (CBPP), in fiscal 2011 46 states struggled to close budget gaps totaling $130 billion, representing approximately 20 percent of their total budgets.
Governments have already made deep, across-the-board spending cuts to address these gaps, but despite such efforts, most public budgets remain compromised. Continued demands for services from citizens affected by lingering high unemployment rates have perpetuated the problem at a time when revenue intake is down. Moreover, there is no sign of this letting up. Projected gaps totaling $113 billion have been tallied for fiscal 2012; a figure that could rise to $140 billion as more states report.
In addition, states will shortly lose a key lifeline as federal assistance provided in the 2009 American Recovery and Reinvestment Act begins to dry up. Roughly $60 billion was available for fiscal 2011, but only $6 billion for 2012.
On current trajectories, governments face continued reduction of citizen services, lower credit ratings and increased bankruptcy risk, signaling potentially dire political consequences for office holders who lack workable strategies to weather the storm.