Maryland is not alone. State governments all across the country are taking a vicious pounding from two directions: plunging tax receipts and soaring demand for services as more people seek help. The result has been $25 billion in higher taxes, $7.5 billion cut from states' spending and an enormous growth in unmet needs. We can expect even worse news in the year ahead.
States find themselves in double jeopardy. They are being "whipsawed," according to one official at the National Governors' Association, by shrinking revenues and the explosive growth of two costly programs -- Medicaid and prison construction. Federal and court mandates make it impossible for states to cut back in these two areas, each of which is growing at nearly a 20 percent annual rate. Medicaid and prison costs are devouring an ever-larger chunk of the states' budget. This leaves less and less money for other essentials, such as schools and social service programs.
The response by states to this fiscal crisis has varied widely. In the past 15 months, 31 states have raised taxes and 29 have cut budgets. Most of the added revenue has been raised in just four states with mega-deficits -- California, Pennsylvania, Texas and Connecticut. The most popular areas for cutbacks have been education, aid to local governments and either layoffs or furloughs of state workers.