In these times of budget shortfalls, state governments across the nation have been forced to lay off workers and cut back vital services to their residents. Contributing to the fiscal crises is a deepening recession that has left millions unemployed. As a result, state revenues from sales and personal income taxes are down sharply.
The loss in revenue means the actions states take to close the gap in their budgets will have adverse consequences for their residents, especially the most vulnerable among them. The impact of cuts in jobs and human services only worsens a faltering economy while simultaneously puncturing gaping holes in the social safety net.
Jobless workers don’t contribute income taxes, do collect unemployment benefits- that is, if they qualify- eventually will lack health insurance coverage, and do less consumer spending. Reduced social services, such as in health care, means many won’t be eligible for those services at a time when there is an increased need for them.
Further complicating matters for working families and individuals are state proposals to tax previously exempt items, removing thousands off Medicaid, decreased funding for elderly services, and raising public college tuition.
In order to pull themselves out of this fiscal crisis and avoid these harmful actions to their residents, states will need help in the form of a federal fiscal aid package. President-elect Obama has indicated his economic stimulus plan will include billions in aid to financially strapped states. Hopefully, it will be given immediate priority in his domestic agenda.