Ten States That Cannot Pay Their Bills

Posted: January 11, 2012 at 6:59 am
Michael B. Sauter, Charles B. Stockdale, Ashley C. Allen

10. New Hampshire
> 2011 budget shortfall as a % of general fund: 27.2%
> 2011 budget shortfall: $365 million
> 2012 projected budget shortfall: 18.4% (8th largest)
> GDP change (2006 – 2010): +7.5% (11th smallest increase)
> Median home value change (2006 – 2010): -4% (12th largest decline)

New Hampshire is often considered to have weathered the recession better than most states. It has one of the strongest economies in the country in many respects. Its poverty rate is a modest 8.1% — the lowest among the 50 states. However, the state did not make it through the recession completely unscathed. Home values dropped 4% from 2006 to 2010, the 12th largest amount, and GDP increased only a small amount compared to other states. New Hampshire’s budget shortfall was the 10th largest in percentage terms. To fight the deficit, the state has enacted a hiring freeze and cut a number of services. It reduced the number of state hospital beds by 15, a change that will result in 500 fewer patients treated per year. It has also cut funds to 10 mental health centers for children’s support services. Despite all these measures, New Hampshire’s projected 2012 budget shortfall is the eighth largest.

9. Connecticut
> 2011 budget shortfall as a % of general fund: 28.8%
> 2011 budget shortfall: $5.1 billion
> 2012 projected budget shortfall: 14.7% (14th largest)
> GDP change (2006 – 2010): +12.8% (17th largest increase)
> Median home value change (2006 – 2010): -3.4% (13th largest decline)

In the past two years, Connecticut has had a combined budget shortfall of just under $10 billion. In 2010, the state spent 27.0% more than its available funds, and in 2011 it spent 28.8% more. Connecticut was not hit as badly as some states by the recession, but home values still dropped 3.4% between 2006 and 2010. During that same period, poverty increased the third-most in the country, from 8.3% of households to 9.7% of households. In order to account for the substantial budget gaps, Connecticut cut government employee salaries, as well as funds for K-12 and higher education. The governor also made substantial budget cuts to programs aimed at preventing child abuse and providing foster care for neglected children.

8. Washington
> 2011 budget shortfall as a % of general fund: 29.6%
> 2011 budget shortfall: $4.6 billion
> 2012 projected budget shortfall: 15.3% (13th largest)
> GDP change (2006 – 2010): +13.4% (12th largest increase)
> Median home value change (2006 – 2010): +1.6% (2nd smallest increase)

Washington’s home values actually increased between 2006 and 2010, but only by 1.6% — an exceptionally small amount compared to other states. On the other hand, the state’s economy recorded a double-digit growth rate. Still, this was not enough to save the state from its budgetary shortcomings. Because of its $4.6 billion budget gap, the state cut public safety funding, assistance for the mentally and physically disabled, and education funding, among others. The state also increased premiums for a health plan that serves low-income residents.

7. North Carolina
> 2011 budget shortfall as a % of general fund: 30.6%
> 2011 budget shortfall: $5.8 billion
> 2012 projected budget shortfall: 12.1% (21st largest)
> GDP change (2006-2010): +12.1% (21st largest increase)
> Median home value change (2006-2010): +12.4% (15th largest increase)

Compared to most states, North Carolina actually fared relatively well during the worst years of the recession. GDP and home values increased substantially, while median income and poverty rates did not worsen by much. Despite this, the state has had high budget gaps for each of the past three years. In 2011, the state had a budget shortfall of $5.8 billion, or 30.6% of available resources. In order to balance the budget, the state was forced to make across-the-board cuts to public health, the elderly and disabled, K-12 education, higher education and the state workforce. The state slashed 21% of funding to a program that pays for nurses and social workers in low-income schools. Because of the cut, 20 schools were left without a nurse or social worker.

6. Vermont
> 2011 budget shortfall as a % of general fund: 31.3%
> 2011 budget shortfall: $338 million
> 2012 projected budget shortfall: 14.3% (15th largest)
> GDP change (2006 – 2010): +8.3% (tied for 14th smallest increase)
> Median home value change (2006 – 2010): +12.4% (18th largest increase)

Vermont was hit extremely hard by the recession. The percentage of people living below the poverty line increased by 13.6% between 2006 and 2010 — one of the largest increases in the country. And while the state’s GDP increased over that period, it only grew a small amount compared to other states. One way Vermont has attempted to bridge its budget gap is by closing the state court system for half a day each week. Other measures include a hiring freeze and cuts to higher education operating funding and financial aid.

5. Maine
> 2011 budget shortfall as a % of general fund: 34.7%
> 2011 budget shortfall: $940 million
> 2012 projected budget shortfall: 13.8% (16th largest)
> GDP change (2006 – 2010): +8.3% (tied for 14th smallest increase)
> Median home value change (2006 – 2010): +5% (26th largest increase)

Maine is another state that conflicts with the assumption that states with severe budget shortfalls were the only ones hit hard by the recession. Median home value actually increased 5% in the state, and the poverty rate dropped the third-most in the country. Nevertheless, Maine faced a $940 million budget shortfall in 2011, worth 34.7% of available funds for that year. In 2011, the state made cuts in every major funding category and to CHIP and Medicaid. It has also instituted hiring freezes for state employees. For the 2012 fiscal year, Maine is again projected to have a budget shortfall, this time of $422 million. In light of this, the state cut temporary cash assistance and food stamps to legal immigrants who have been in the country less than five years.

4. New Jersey
> 2011 budget shortfall as a % of general fund: 38.2%
> 2011 budget shortfall: $10.7 billion
> 2012 projected budget shortfall: 36.0% (2nd largest)
> GDP change (2006 – 2010): +7.1% (10th smallest increase)
> Median home value change (2006 – 2010): -7.5% (9th largest decline)

Home values in New Jersey dropped 7.5% between 2006 and 2010, the ninth largest decline. For the third year in a row, the state has initiated deep cuts to close its budget gap. The state made the eligibility requirements for its public health insurance program more strict. As a result, approximately 50,700 low-income adults will lose access to health care coverage, according to CBPP. The state cut funding to after-school programs, which will affect 11,000 students and cause 1,100 staff workers to lose their jobs. That is on top of already cutting 2,000 state positions. Despite all of these changes, the state’s projected budget shortfall for 2012 is only 2.2 percentage points lower than this year’s and the second-largest among the states.

3. Arizona
> 2011 budget shortfall as a % of general fund: 39.0%
> 2011 budget shortfall: $3.3 billion
> 2012 projected budget shortfall: 17.0% (10th largest)
> GDP change (2006 – 2010): +2.7% (4th smallest increase)
> Median home value change (2006 – 2010): -28.6% (4th largest decline)

Like its neighbor Nevada, Arizona was hit particularly hard by the subprime mortgage crisis. Between 2006 and 2010, median home values plunged 28.6% in the state, the fourth worst price drop in the country. GDP, poverty and income levels have either stagnated or become significantly worse during this period. Since 2009, the state has had among the worst budget gaps in the country, a combined total of $12.1 billion for the three years. To balance its budget, Arizona has made dramatic budget cuts, including revoking Medicaid eligibility of more than 1 million low-income residents and cutting preschool for more than 4,000 children.

2. Illinois
> 2011 budget shortfall as a % of general fund: 40.2%
> 2011 budget shortfall: $13.5 billion
> 2012 projected budget shortfall: 16.0% (11th largest)
> GDP change (2006 – 2010): +8.2% (13th smallest increase)
> Median home value change (2006 – 2010): -4.2% (11th largest decline)

Illinois has consistently had among the largest budget shortfalls in the country since 2009. It also was hit extremely hard by the recession. Between 2006 and 2010, home values decreased by 4.2%. GDP grew a relatively small 8.2%. Median household income increased less than 2%. The state made cuts in its budget for community mental health services for both children and adults, and it cut its school education funding by 4%, or $311 million. Governor Pat Quinn has announced also that he will lay off thousands of state employees.

1. Nevada
> 2011 budget shortfall as a % of general fund: 54.5%
> 2011 budget shortfall: $1.8 billion
> 2012 projected budget shortfall: 37.4% (the largest)
> GDP change (2006 – 2010): +1.2% (smallest increase)
> Median home value change (2006 – 2010): -44.5% (the largest decline)

No state has suffered during the recession more than the state of Nevada. Between 2006 and 2010, home values plummeted a staggering 44.5%, the poverty rate increased 26%, median income dropped 3.8% and GDP increased only 1.2%. Each was the worst in the country for that category. Last year, Nevada’s budget gap was $1.8 billion, the equivalent of 54.5% of available funds. This was the third year in a row the state has had one of the worst shortfalls in the country, and that trend appears ready to continue through at least 2013. In order to balance its budget last year, Nevada was forced to raise taxes significantly, cut dental and vision services from Medicaid coverage for adults and reduce financial aid funding and state employee salaries.

Illinoise should lobby to split into N. Illinois and S. Illiniois. Let Chicago have the Lakefront and surrounding counties. Then you have to give St. Louis to MO.

After that, S. Illionois would see rapid growth and success.

Connecticut?

Really?

But, But, But...Lowell Weicker told us that Connecticut's budget problems would be solved if an income tax bill was passed.

And Lowell got the Profiles in Courage Award from the Kennedys for getting the income tax bill passed, so you know it was a great idea!

And, Republican State Senator Marie Herbst, who voted in favor of the income tax as one of the last holdouts told us, "There are safeguards in the bill that prevent budget problems in the future."

So the WSJ has to have this all wrong!

I am so glad we moved out of that liberal Hell-Hole.

they offer proof of impending doom with these:

It has also cut funds to 10 mental health centers for children’s support services; Connecticut cut government employee salaries, as well as funds for K-12 and higher education; ...the state cut public safety funding; ...K-12 education, higher education and the state workforce; ...It has also instituted hiring freezes for state employees; ...and cutting preschool for more than 4,000 children; ...and it cut its school education funding by 4%...

if these measures had been taken sooner and "cut" deeper , they'd probably all be just fine.(chicken and the egg story) were these all really "cuts", or just reductions in the amounts the educrats and poverty pimps wanted?

No, I’m in Northern Illinois and we don’t want Chicago either!

I say split the state into “Chicago and the Collars” and “Downstate”. That would put most of the Gimme entitlement mentality in one place, and folks who aren’t afraid to work for a living in the other. Or just let our part join up with Wisconsin again, like it was before statehood.

They’ve already got toll roads to get into the place, we’ll just add border checkpoints so they can’t get out!

“With the exception of AZ, every one of these bankrupt states is headed by Democrats. Yet, the clueless voters will continue to vote Democrat because many of them receive the government’s hot checks.”

None of the states on the list is “bankrupt”. Running a deficit isn’t good, especially doing it every year. But it’s a far cry from being bankrupt.

NH still has a Rat governor, who managed to get re-elected largely because of an “independent” candidate who pulled in some conservative votes. In the same election, the Republicans swept the other state-wide offices and took control of both houses of the legislature. The republican legislature has been getting spending under control, but hasn’t quite gotten the budget balanced yet. The voters here aren’t totally brain-dead, at least not yet.

I know how much FReepers love their whipping boys but there are some other external issues that play into these things. Obviously they aren’t the only issues but they can help push a state over the edge.

Things like federal regulations hit some states harder than others depending on the industries and resources in them. For instance, if congress were to lift the great lakes directional drilling ban, it would create an economic boom for the whole region. Thousands of jobs would be created within the NG industry and untold thousands more could be created in industries that benefit from a cheap readily available energy source.

While its our own fault that Michigan is a union state, the surrounding union states create a protective buffer for union security. We’re quietly cheering on the right to work fight in Indiana because even our unions admit that if Indiana goes right to work, we’ll have little choice but to follow suit.

Every state is overtaxed by the federal government but the weaker states feel it a whole lot more.

A few years ago, Tennessee was under complete Democrat control. There was a BRUTAL and dirty campaign to force a state income tax down our throats, or the world would come to an end and the parks would close, police, fire and teachers would be laid off.

Except that the governor was a traitorous Republican piece of dog feces named Don Sundquist.

“Now I am confused. I thought the states were required by their constitutions to balance the budget each year.”

Where did you get that idea? Even the handful of states with “balanced budget” requirements tend to allow deficit spending if approved by something greater than a simple majority. And there are states that use dubious “projections” to “plan” a “required” balanced budget, and then act surprised with reality doesn’t match the plan.

Can you point to even one state with a rigorous requirement in the constitution that the budget is balanced? I can’t think of any off the top of my head.

Being the born and bred Texan that I am, I haven’t spent a lot of time up there. However, I have been to Boston, New Hampshire ,and Vermont, and thought it was lovely country up there.

I’m sorry that you are losing people due to high taxes. Apparently the politicians that are elected up there are doing you in.........

Being the born and bred Texan that I am, I haven’t spent a lot of time up there. However, I have been to Boston, New Hampshire ,and Vermont, and thought it was lovely country up there.

I’m sorry that you are losing people due to high taxes. Apparently the politicians that are elected up there are doing you in.........

Good idea...

States defaulting would not jeopardize curreny transactions. The states will simply cut obligations and continue to collect state taxes to pay for things they need. Most states on the list already do this.

I am not worried about an end-of-civilization situation because a bunch of state employees no longer receive their pensions.

I hear it on TV news all the time. Every time a politician claims he balanced x number of budgets some pundit comes along and discounts it because “every state is required to balance their budget”.

Michigan has a balanced budget law. It cannot run deficits,and has been forced to cut budgets as a consequence. While still too big for Me, the states government is much smaller than in the past.

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