Ten States That Cannot Pay Their Bills

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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.

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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% (13th 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% (8th 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% (17th 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.

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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% (14th 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.