Deltek Sr. Analyst Evan Halperin reports.
Just a few days ago, the New York Times reported on how state governments are going to be forced to make tough decisions regarding their budgets. Some states, like Maryland, have actually increased their income tax on high earners in order “to preserve services and spending on its well-regarded schools.” Other states have taken a different approach, like Kansas, which has cut income taxes in order to try and boost its economy. These types of decisions have come out of states that have different political affiliations. Maryland has a Democrat-controlled state house, while Kansas is controlled by Republicans. As we move forward, it will be interesting to see how states among the parties will handle these budgetary decisions.
Another way in which states can move forward with tough budget decisions is to look at using rainy-day funds. These funds dried up during the heart of the recession a little more than four years ago, when the market crashed and the U.S. (along with most of the world) was left with significantly less tax revenue and budgets in the red. States across the country raced to slash budgets, lay off workers, and cut several programs, many of which benefited low-income families. Fortunately, over the past few cycles, conditions have improved in some states, and while everything isn’t A-okay, those states are sitting on replenished rainy-day funds. The question now is: What do states do with that money?
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