States still facing budget challenges post-recession

A full 60 percent of states have general fund budgets below 2007 levels, according to a new Associated Press analysis.

The AP review found, generally speaking, that states are still struggling to make ends meet, even with the recession officially over and that it could be several more years before they resume spending at pre-recession levels.

States also will not have the added boost of stimulus funds in fiscal 2011, AP reported.

In all, the 50 states have roughly $734 billion in revenue at their disposal for the upcoming fiscal year – or down around 5 percent from the 2008 fiscal year. 

Compared to 2007 levels, tax revenue had fallen the most dramatically in Arizona (19 percent), California and Florida (18 percent), and Michigan and Tennessee (17 percent). Arizona, California and Florida were all hit hard by the housing crisis.

As a group, the states also have roughly $690 billion in unfunded pension liabilities and another $418 billion or so in locked-in healthcare obligations for retirees. 

A dozen states also had deficits of at least 15 percent in their general funds.

Rep. Devin Nunes (R-Calif.) and Sen. Richard Burr (R-N.C.) have introduced legislation that would expressly bar the federal government from bailing out any states that can’t pay out their pension liabilities.