“We don’t need a hiccup now in our recovery,’’ she added. “We are fragile.’’
States have made $75 billion in budget cuts and raised taxes by $33 billion over the past two years to make up for budget shortfalls. Governors drained reserve cash funds and oversaw several rounds of severe budget cuts, so much so that Republicans and Democrats alike now are focused on how to completely remake state governments.
The overall economic situation in states is improving, but slowly. “Recovering, not recovered,’’ as Governor Deval Patrick of Massachusetts put it.
High unemployment persists. Even more dire budget situations are to come.
Over the next 2 1/2 years, states face an estimated $175 billion more in budget gaps that they have no choice but to fill. The hole is caused partly because an initial infusion of cash from President Obama’s economic stimulus law, as well as extensions of that money, will dry up in June. States received $103 billion in Medicaid money and $48 billion in education dollars to soften the recession’s blow.
The warnings come just as the Commerce Department reported that state and local responses to the fiscal crisis were undercutting the national recovery, slowing economic growth. Governors said the report only proved their point.
“For two years, governors have said when we cut we impact the recovery,’’ said Gregoire. “We know we have to make the cuts, but we can ill afford to have Congress on top of that cutting us more because the result will slow the recovery in our home states and in the nation.’’
Shutdown will imperil economy, Obama says
President Obama said yesterday that the economic recovery will stall if Congress can’t agree on spending cuts and avoid a government shutdown.
The current budget expires Friday. That means lawmakers must OK a new spending plan before the March 4 deadline to keep much of the government from running out of money and closing.
