The ongoing decline in tax receipts has worsened state budget problems. At least 48 states addressed or are facing shortfalls in their budgets for the upcoming year totaling 24 percent of state budgets. (Center for Budget and Policy Priorities). New data show a majority of states expect shortfalls in 2011 as well. Aggregate gaps through 2011 likely will exceed $350 billion.

The current recession is more severe — deeper and longer — than the last one, and state fiscal problems have proven to be worse and are likely to remain so. Unemployment, which peaked after the last recession at 6.3 percent, has already hit 9.4 percent, and many economists expect it to rise higher. If, as is widely expected, the economy does not begin to significantly recover until the end of calendar year 2009 or later, state shortfalls are likely to be even larger in fiscal year 2011 (which begins in July 2010 in most states). The deficits over the next two-and-a half years are likely to be in the $350 billion to $370 billion range.

North Carolina, just like nearly all states, must report a balanced budget this year. The current budgetary shortfall for the coming year is estimated to be over $3 billion. How is this linked to the level of unemployment in North Carolina? How will the state government's efforts to close this shortfall affect the number of North Carolinians unemployed?

Developing the State Budget: State Office of Management and Budget

So, who's in charge of the budget?: Charlotte Observer, 28 July 2009

Federal Fiscal Relief is Working as Intended: Center for Budget and Policy Priorities, 29 June 2009.

New Fiscal Year Brings No Relief from Unprecedented State Budget Problems: Center for Budget and Policy Priorities, 12 August 2009

Summary of Recommendations for 2009-2011: North Carolina State Office of Management and Budget

Budget shortfall over $3 billion -- Governor Perdue : ABC-11, 28 April 2009.

The Real Job Destroyer: Chris Fitzsimon, NC Policy Watch, 28 June 2009.

1. What are the legislative responsibilities in this situation?
2. What is the responsibility of the governor?
3. Are there employment-generating ways to close the budget shortfall?

Work with the budget shortfall of $3 billion reported in the news articles above. What will be the economic cost to the state of cutting expenditures by this amount in

• Education
• Health
• Public safety/prisons
• Social welfare programs (Aid for Families with Dependent Children, Medicaid)

Will these be one-time costs, or do today's costs lead to further costs in future years?