States still struggling with budgets

The state financial picture nationwide continues to be bleak, according to a new report from the National Governors Association and the National Association of State Budget Officers. Halfway through the year the states have reported cuts of $14.5 billion as they deal with the most serious budget situation in half a century, and half the nation's governors have plans to reduce state spending next year.

As the states head into what is expected to be the third year of slowing revenues and heavier demands on spending, budget-balancing is being accomplished through a combination of borrowing, spending cuts and tax and fee increases, the report states. New fiscal years begin July 1 in all but four states.

NGA Executive Director Raymond Scheppach said the current expectation is that times will continue to be tough for states for a few more months, with some pickup to state revenues at about this time next year.

At a Washington news conference, Scheppach blamed the current situation on "a virtual collapse of state revenues--sharp, deep and long" exacerbated by an "explosion" in health-care costs. The worst of the current downturn may still be five months off, he said.