Maine Not the Only State Facing Budget Deficit

New Report Cites 13 States with budget shortfalls.
Friday December 21st, 2007

Maine is not the only state seeing red this holiday season.  Thirteen states face a combined budget shortfall of at least $23 billion for fiscal 2009, according to a recent report by the D.C.-based Center on Budget and Policy Priorities (CBPP).  Although it may be little consolation for those services and programs being ‘constrained’ by the Governor’s first pass at balancing the budget, Maine can take some heart that our deficit (1.8% of the general fund) is the lowest in the group.  Rhode Island and California are facing 10% revenue shortfalls with the remaining states averaging around 6%. Another eleven states expect deficit problems over the next two years suggesting budget woes will be a reality across the country for a number of years.

According to CBPP, some of the fiscal problems facing states are due to economic conditions outside states’ control.  For example, state sales tax revenue has declined because the bursting of the housing bubble has reduced sales of furniture, appliances, construction materials, etc.  In many states, economic problems are magnified by past state decisions about taxes, including multi-year tax cuts, without accurately assessing their affordability or the failure to address structural weaknesses in their budgets.

“I think it’s important to note that Maine has avoided those kinds of structural weaknesses,” states Christopher St. John, executive director of the Maine Center for Economic Policy (MECEP).  “Our deficit is primarily a result of a slowing national economy and not due to poor fiscal planning.”

Because states are required to balance their budgets each year, they have limited options for dealing with these significant budget gaps. States can tap into existing reserve funds, cut spending, or raise taxes.  “The problem is more on the revenue side than the spending side,” said Elizabeth McNichol, co-author of the CBPP report.  “Six years into the economic recovery from the last recession, state expenditures on average are still a smaller share of the economy than they were in 2001.” St. John points out that Maine’s general fund appropriations are also a smaller share of the state economy than they were in 2001, as measured by personal income or gross state product.

The full report can be accessed at

This report is also listed on the following CBPP web pages:

Home page under “New from the Center”:

State Budget and Tax Page: New State Budget and Tax Analyses:

Long-term Structural Problems in State Finances:

State Finances: