But it isn't their fault. Tax revenues have fallen off a cliff, leaving states with a cumulative budget gap of more than $100 billion for fiscal '09. To deal with these shortfalls, states have laid off or furloughed thousands of employees, raised taxes and fees, and slashed spending on education and other social programs - some, many times over. It was supposed to balance their '09 budgets. But it wasn't nearly enough. As it turns out, state officials were far too optimistic about the '09 revenue picture, and they are scrambling to deal with widening shortfalls before the end of the fiscal year (which, by the way, is tomorrow for all but a few states). At this stage in the game, there are only a couple of ways for states to balance their '09 budgets (it's too late for more tax hikes and spending cuts). Most are expected to do one of two things: (1) tap rainy day funds or (2) use federal stimulus money.
Dr. Kelton argues for even a greater commitment to Federal revenue sharing or “state and local fiscal relief”. She has a point.