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Report of the State Budget Crisis Task Force

July 17, 2012

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The purpose of the report is to understand the extent of the fiscal problems faced by the states of this nation in the aftermath of the global financial crisis.

Our federal system gives state governments responsibility for providing most domestic governmental functions such as public education, health and welfare services, public safety and corrections and essential infrastructure for transportation, water supply, sanitation and environment. States oversee the elementary and secondary school systems that educate the nation's future voters, jurors, and workforce and, together with localities, pay more than 90 percent of the cost of this education. State and local public colleges and universities educate more than 70 percent of the students enrolled in this country's degree-granting institutions. States spend more than $200 billion annually for health care for the poor and medically needy. States and their localities finance nearly three-quarters of all public infrastructure — schools, highways and transit systems, drinking water, and other projects crucial to economic growth and public health and safety. They employ 19 million workers - 15 percent of the nation's workforce and six times as many workers as the federal government employs. In total, state and local governments combined spent $2.5 trillion in 2009, which is more than the federal government spent on direct implementation of domestic policy.

States have been grappling with their most serious fiscal crises since the Great Depression. Even before the 2008 financial collapse, many states faced long-term structural problems, and now they face additional threats.

To understand the threats to fiscal sustainability, we examined six states - California, Illinois, New Jersey, New York, Texas, and Virginia—in depth. While all states are different, these states reflect important geographical and political differences within our country. They account for more than a third of the nation's population and almost 40 cents of every dollar spent by state and local governments. All six states face major threats to their ability to provide basic services to the public, invest for the future, and care for the needy at a cost taxpayers will support.

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