Corporation for Enterprise Development
First published November 2011
Although the country emerged from official recession more than two years ago, states continue to face budget shortfalls. High unemployment continues to both decrease tax revenue and increase demand for services. By law, most states must balance their budgets. The options they have for closing the gaps are to increase revenue, decrease spending or both. The choices state policymakers are forced to make are undeniably painful – and in some cases, shortsighted. State policymakers should take a balanced approach to closing state budget gaps that includes raising revenue by eliminating ineffective tax expenditures, as well as careful spending cuts.
It is critical that existing programs and policies that provide financial security and opportunity for vulnerable families be protected. At the same time, policymakers can and should be laying the groundwork for future state economic prosperity. While there is clearly no appetite for new state spending in this environment, states’ hands are not tied. There are a host of cost-neutral policies that expand economic opportunity and that are also political winners.
In a weak economy, with high unemployment and shrinking services, constituents are hungry for some “good news” about what policymakers are doing to improve constituents’ economic prospects. This report provides two dozen examples of positive steps government can take to help constituents – more and more of whom are facing financial insecurity – weather a bad economy.