InsiderLogo.png

Which States Have State Budget Deficits or Shortfalls? That Question is Harder to Answer than You'd Think

By Liz Malm | February 23, 2016
Topics: Budgets, Tax

UPDATED: An updated version of this post is available here.

One of the most common questions we get during state legislative sessions is: “Which states have budget deficits, and how big are the shortfalls?” It turns out that question is very difficult to answer. In this post, we'll do two things: give an overview of states with budget deficits and explain why reporting on them is so tedious and confusing.

We count 16 states with FY 2016 and/or FY 2017 budget shortfalls. These states are shown in the map below. At the end of this article is a list of states with specific deficit figures (including ranges if more than one figure was reported), sources, and any relevant state-specific notes. It's a good idea to call a state's budget office prior to acting based on any of the deficits we cite.

With so many caveats, one might wonder why we bothered to aggregate these deficit figures. Despite the ambiguity, it's still instructive (and interesting!) to consider general trends on how state budgets are faring, and it also provides an opportunity to explain the challenges associated with state budget deficit numbers cited in the news.

Budget Shortfalls FY 2016 and-or FY 2017 (3)

Just Why is Reliable Reporting So Tough?

Reliably reporting on or projecting state deficits (or surpluses) on a national level is a massive undertaking. There are three main reasons for this: (1) the data is not centralized within states; (2) the data is not consistent between states; (3) the data is inherently misleading.

The first problem results from the fact that in many states there is a not a single agency or entity responsible for reporting on or forecasting all revenues. Even if limited to general fund revenues, there are still often multiple sources for receipts and forecasts in a state. A good example of this issue is Colorado, where five different deficit numbers were cited by media from multiple agencies over the course of a few months. (As an aside, a great resource to help you understand how states come to budget deficit or surplus numbers is the National Association of State Budget Officers' “Budget Processes in the States.” It outlines the agency or agencies in the state that make these projections and gives a general overview of timelines. The most recent edition can be found here.)

The second problem is obvious - every state counts differently. Enough said about that. The third may be the most problematic. The old saw is: a state's deficit is roughly half of what it is reported to be. The reason for this is that baseline spending growth forecasts are in many states always higher than what is actually appropriated. In other words, the built-in year-to-year upward spending adjustment is routinely reined in by the legislature, through good and bad revenue years. Thus even the most robust revenue year could show a "deficit."

There are a few logistical problems on top of these three. Media reports on budget shortfalls often don't clarify whether the number is for the current fiscal year or the upcoming fiscal year. This distinction is important. A current fiscal year deficit is often referred to as a “mid-year” deficit or shortfall associated with the budget that's already been enacted (e.g., FY 2016 currently, which runs from July 1, 2015 to June 30, 2016 in 46 of the 50 states). An upcoming fiscal year deficit is referring to a predicted shortfall for the next fiscal year for which lawmakers are currently planning (e.g., FY 2017, July 1, 2016 to June 30, 2017 in most states). Of the two, current year deficits are more “real” in that they ordinarily must be corrected through immediate expenditure reductions or fund shifts. Future year deficits are commonplace and resolved through the budget process. Large deficits relative to overall budget are problematic at any time, of course.

On top of this common confusion, spending and revenue projections are repeatedly updated over the course of a year, so it's often difficult to know which budget projections news coverage is citing. When one Googles “Maine's budget deficit,” the search may return multiple results over the course of a few months as the budget picture is revised.

Exhibit A: Alabama

A great example of the confusion associated with budget deficit reporting is the news coverage surrounding Alabama's upcoming fiscal year 2017 budget. (Which, coincidentally, is one of the four states that has an “off” budget cycle: October 1 to September 30. Other state with non-standard fiscal years are Michigan, New York, and Texas. Dates for these states can be found here.) As we noted above, news reports generally fail to note which fiscal year to which the deficit projections apply. It is unclear in news reports whether references to “this year” meant “this fiscal year's existing budget” (FY 2016), or “this calendar year (2016) when lawmakers are hashing out the upcoming fiscal year (FY 2017) budget.” Here are a collection of quotes to illustrate this point:

  • The Plainsman: “This year, the budget deficit measures in at more than $40 million.” We contacted the author of this piece and it was clarified that the piece was referring to the upcoming fiscal year 2017 budget.
  • WBRC Fox6 News: “The General Fund Budget, which runs state government, is $42 million short. As the legislature gaveled into session, word spread quickly the general fund budget will have less money available to operate.”
  • Alabama News: The Legislative Fiscal Office on Tuesday told lawmakers that the general fund budget is expected to have at least $40 million fewer dollars.”

One article definitively mentioned that the projected upcoming fiscal year deficit, however, was $157 million: “Governor Bentley proposed moving money from the Education Trust Fund to shore up a $157 million budget shortfall for the fiscal year that begins October 1.” In light of all this confusing information, we called the Alabama Budget Office, which reported that there is currently no deficit for FY2016 and they are not currently projecting a deficit for FY 2017. In other words, clear as mud.

The moral of the story is that when reading and reporting on budget deficits in the states, it's important to keep in mind that these numbers come from many places and do not perfectly align. To be an educated consumer of these statistics, you should always keep these caveats and warnings in mind and be cognizant of whether or not the numbers refer to the current fiscal year or the upcoming fiscal year.

Based on News Coverage, Which States Are Reported as Having Budget Deficits?

Here we list the 16 states with budget deficits reported in the news (excluding Alabama), in addition to the specific dollar amounts, sources, and any state-specific notes. Did we miss any? If you've seen any additional numbers we didn't cite here, please let us know!

Alaska (state has biennial/two-year budget)

Colorado

Connecticut (state has biennial/two-year budget)

Illinois

  • Current Year Deficit (FY 2016): $6.2 billion (additional source here)
  • Upcoming Fiscal Year Deficit (FY 2017): none cited

Kansas

  • Current Year Deficit (FY 2016): none cited at this time, but note that Kansas had trouble with their FY 2016 budget when devising the budget in 2015
  • Upcoming Fiscal Year Deficit (FY 2017): ranging from $175 million to $190 million

Kentucky (state has biennial/two-year budget)

  • Current Year Deficit (FY 2016): none cited
  • Upcoming Fiscal Year Deficit (FY 2017): $279 million
  • Note that a biennial budget shortfall (FY 2017 and FY 2018) of $500 million has been reported.

Louisiana

Maine (state has biennial/two-year budget)

  • The current (FY 2016) and upcoming (FY 2017) fiscal years are reported together on the sidebar of this website: $460 million combined.

Massachusetts

  • Current Year Deficit (FY 2016): none cited
  • Upcoming Fiscal Year Deficit (FY 2017): $635 million (additional source here)

Nebraska (state has biennial/two-year budget)

  • Current Year Deficit (FY 2016): none cited
  • Upcoming Fiscal Year Deficit (FY 2017): $200 million

New Mexico

  • Current Year Deficit (FY 2016): none cited
  • Upcoming Fiscal Year Deficit (FY 2017): $800 million
  • Note that New Mexico's session is now over and they were able to pass a balanced-budget appropriations bill (HB 2; coverage here).

Oklahoma

  • Current Year Deficit (FY 2016): none cited
  • Upcoming Fiscal Year Deficit (FY 2017): $900 million (additional source here)

Pennsylvania

Vermont

West Virginia

Wyoming (state has biennial/two-year budget)

  • Current Year Deficit (FY 2016): $159 million
  • Upcoming Fiscal Year Deficit (FY 2017): unknown
  • Note that one legislator was cited as saying the “deficit will be only $100 to $200 million. At worst, $400 million.” It is unclear to which year he was referring to, or if he was referring to a biennial budget period.

The remaining 33 states haven't reported deficit or shortfall issues (again excluding Alabama since we covered it above), have a surplus, or aren't currently in session. These states are:

  • Arizona
  • Arkansas
  • California
  • Delaware
  • Florida
  • Georgia
  • Idaho
  • Indiana
  • Iowa
  • Maryland
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana (not in session)
  • Nevada (not in session)
  • New Hampshire
  • New Jersey
  • New York
  • North Carolina
  • North Dakota (not in session)
  • Ohio
  • Oregon
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas (not in session)
  • Utah
  • Virginia
  • Washington (Note that the state is projected to have a shortfall in the biennium ending in 2019, however.)
  • Wisconsin (For now—the budget picture is still a bit unclear. See here for more details.)

Interested in more content like this? Follow Liz on Twitter, or see more on Budgets and Taxes.

Recent Articles

Popular Articles