Budget Nightmare: 10 Most Broke States

The county's most-remote state had a shockingly large shortfall this year for one simple reason: oil prices plunged. Alaskans pay no state sales tax or state income tax. In fact, the state pays every man, woman and child who has lived there at least a year money to, well, live there. The so-called Permanent Fund paid $3,269 from oil taxes and royalties to the 610,768 residents who qualified last year.

But signs are showing that the fund isn't so permanent. Oil production in Alaska has declined by 64 percent since 1988 but had very little impact on the state's budget because at the same time the price of each barrel of oil has shot up significantly. Then came the global recession. Oil prices fell from more than $140 a barrel last summer to about $30 this winter before climbing back up to $64 a barrel today.

That drop caused the state's corporate taxes -- essentially all oil money -- to fall 32 percent compared to last year, creating a rare budget problem for Alaska. The state easily solved it this year by taking money out of flush reserve funds, built up during oil boom years. But many state watchers questioned the future of Alaska's ability to fund its services and continue its annual Permanent Fund payments to residents.

That's one problem Gov. Sarah Palin won't have to deal with. She's announced her resignation from the job.

New Jersey: $8.8 billion or 30 percent of its budget

The Garden State has seen a double-whammy of problems from a drop in Wall Street salaries and also a fall in gambling revenues in Atlantic City. To close the gap, the state eliminated 2,000 jobs by encouraging early retirement, leaving vacancies unfilled and laying off staff. About $325 million will be saved through wage freezes and furloughs, although unions have yet to formally sign on to the plan.

The state is also skipping making a $940 million payment to its pension fund. The money will have to be made up at some point and the longer the state waits, the larger the repayment will have to be.

New Jersey also raised about $1.2 billion in new taxes, mostly from tax filers earning $400,000 or more. It also scaled back and eliminated property tax rebates for people earning $150,000 or more.

The state also increased so-called sin taxes on cigarettes, lottery winnings larger than $10,000 and alcohol, except beer.

Big Layoffs

Oregon: $4.2 billion or 29 percent of its budget

With nearly $800 million in tax increases, Oregon is among a handful of states to recently approve big tax hikes. Budget cuts announced in May anticipated the layoffs of 1,700 state employees and a 14 percent budget cut in higher education, for $2 billion in cuts.

Oregon's lawmakers traditionally meet just every other year, but state legislators met last month to pass a $6 billion budget for the state's K-12 schools, despite concerns from Gov. Ted Kulongski. However, schools still have to cut back, as evidenced by bigger classes, fewer music and athletic programs and a freeze in employee pay at many districts.

While public school students were spared from deep cuts, the same cannot be said for the state's working poor, seniors and disabled. The Department of Human Services will receive $387 million less than what officials say is needed to sustain their programs. Among the largest cuts is a $41 million reduction in a daycare program for low-income families.

The state legislature will reconvene in February.

Vermont: $278 million or 25 percent of its budget

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