Budget gaps and balanced-budget proposals in Third District states
The Great Recession has severely tested the strength of state finances and the soundness of state budget practices. Quarterly state tax revenues have declined year-over-year for a record five quarters, from the fourth quarter of 2008 through the fourth quarter of 2009. The depth of decline is also unprecedented, with a 16.5 percent drop in the second quarter of 2009. An immediate consequence is that states are facing massive fiscal shortfalls, triggering rounds of tax increases and service cuts, plus reliance on federal stimulus money, reserves, one-off actions, and borrowing against the future. The Third District states (Delaware, New Jersey, and Pennsylvania) have been similarly affected. Examining how each state is coping with the worst fiscal crisis of the last half-century sheds light on their respective fiscal practices and raises questions for further research. This report describes the scope of each state’s fiscal problems, including current and projected budget gaps, the effect of stimulus funding, and anticipated state-level policy responses. Key findings from this report include:  Budget gap estimates for Third District states vary significantly on a percentage-of-budget basis. The District’s aggregate gap is virtually identical to the national aggregate in FY 2009 and FY 2010, and somewhat smaller in FY 2011 than nationally.  Federal stimulus funding has reduced, but not eliminated, state budget gaps.  Delaware has avoided persistent structural budget problems and has been able to address this budget crisis with a balance of revenue increases, expenditure cuts, and federal stimulus aid, rather than deferring pension payments or employing other one-off strategies.  New Jersey has faced annual structural deficits since at least FY 1994 and will close its FY 2011 $10 billion budget gap in a technical sense. However, by relying on deferred payments and oneoff policies, New Jersey will fail to balance its budget from a long-term perspective.  Revenue declines were smaller for Pennsylvania, but the state has been heavily reliant on stimulus funds, it faces mounting long-term pension obligations, and it is responsible for an unusually large number of distressed cities and municipalities.
Riding the Revenue Roller Coaster: Recent Trends in State Government Finance*
The fall in state tax revenue during the current recession and the one in 2001 highlights an increase in the variability of this source of revenue that has been observed over the past two decades or so. But states have sources of revenue other than taxes. However, while providing a relatively constant portion of total revenue over the past several years, these sources have generally not damped variability in state revenue arising from variability in taxes. Consequently, variation in state tax revenue remains an important issue for state government finances. In this article, Tim Schiller looks at the causes of the increased variation in state tax revenue during recent business cycles compared with earlier ones. He also reviews strategies for coping with fluctuations in state tax collections.
Positive Rights and State Constitutions: The Limits of Federal Rationality Review
INTRODUCTION ............................................................................................................................. 1132 I. STATE CONSTITUTIONAL WELFARE PRACTICE ............................................................. 1144 A. A Mandatory Obligation: The New York Example .................................................. 1144 B. A Typology of Current State Court Decisions .......................................................... 1145 IT. RECONSIDERING FEDERAL RATIONALITY REVIEW IN STATE CONSTITUTIONAL WELFARE CASES ................................................................................ 1153 A. Rationality Review and Positive Rights .................................................................. 1155 B. Rationality Review and Democratic Legitimacy .................................................... 1157 C. Rationality Review and Judicial Finality ............................................................. xi61 D. Rationality Review and Federalism ......................................................................... i166 E. Rationality Review Revisited .................................................................................... 1169 III. TOWARD A NEW STANDARD OF REVIEW ......................................................................... 1169 A. The Need for Judicial Review .................................................................................. 1170 B. Institutional Competence and Welfare Litigation ................................................... 1175 I. State Courts as Fact Gatherers ......................................................................... 1175 2. State Courts as Policymakers ......................................................................... " 179 3. State Courts as Rights Enforcers ..................................................................... 1182 C. A Jurisprudence of Consequences .............................................................................. 1183 D. Why Education and Not Welfare? ........................................................................... i86 E. Implications for Welfare Litigation ........................................................................... i9i IV. CONCLUSION ........................................................................................................................ 1194