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State Budgets Improve a Little, but More Pain Awaits

While state budgets have improved slightly over the past year, more than a dozen states so far have made mid-year cuts to K-12 education, and the fiscal outlook going forward remains grim, according to a national report released today.

On the whole, financial conditions in fiscal year 2011 have gotten modestly better compared to the previous year, a 50-state survey of budget officials finds. Thirty-five states, for instance, have approved fiscal 2011 budgets with higher general fund spending than they did in 2010. Yet that spending still remains below 2008 levels. And state number-crunchers are also bracing for a "significant wind down" of federal stimulus dollars, which could force more spending cuts to education and other programs, the authors note.

"States still face very tight fiscal conditions and will be forced to make numerous, difficult spending decisions," the report says, and policymakers will cope with "the perpetuation of challenging fiscal conditions for fiscal 2012 and beyond."

The Fiscal Survey of States, a series dating back to 1979, is published twice annually by the National Association of State Budget Officers and the National Governors Association. In most states, fiscal year 2011 would have begun in July, the report notes. The survey collected information from state budget officials from August through October of this year.

In fiscal 2010, 39 states made mid-year budget cuts, worth about $18.3 billion, and 35 states made those mid-year pare-downs to primary and secondary education. So far through fiscal 2011, 13 states have brought the mid-year budget ax down on K-12 schools, while 10 have reduced budgets for higher education.

Why do states make mid-year cuts? Many states have seen a dramatic drop-off in tax revenues, the authors say, creating discrepancies between what states thought they would collect and what they had planned to spend.

States have also taken other approaches to making up the difference. They have approved $6.2 billion in increased taxes and fees to date in fiscal 2011.

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