Which states are facing the worst budget deficits in 2010?

Arizona. Like California, Florida, and Nevada, Arizona is one of the states that was hit worst and earliest by the housing crisis. “The fiscal situation is dire,” state officials states in NCSL’s survey, citing major shortfalls in all budget categories. Lawmakers are forecasting a 30 percent budget gap in the next fiscal year.

Illinois. The Land of Lincoln is already facing a budget gap of 16.5 percent through the first five months of this fiscal year, and the outlook for next year – particularly with looming pension payments – is gloomy, with a gap of at least $11 billion.

Hawaii. Three-day-a-month furloughs, a reduced school year, and an income tax raise on top earners haven’t been enough to help the state make up its budget gaps: It already faces a shortfall of 13 percent since the fiscal year began in June, and is projecting a 21-percent gap for the next fiscal year.

New Jersey. The state has the third-highest projected budget shortfall for FY2011 (behind Nevada and Arizona) – 27.5 percent – and incoming Gov. Christopher Christie (R) is eyeing cuts of up to 25 percent, on top of $800 million in cuts already outlined. The state’s unemployment fund is forecast to have a $1.2 billion deficit within three months, and will trigger a controversial automatic tax increase on employers.

New York. The state already has a $3 billion budget gap (6 percent) since its fiscal year began in July, which is expected to double by the next budget. Gov. David Paterson (D) ran into controversy earlier this month by proposing to delay payments to schools, hospitals, and cities to keep the state from running out of money. He and the legislature have been battling over how to balance the budget, and he is threatening to use executive powers to cut about $1.6 billion from the budget.

Nevada. One of the hardest hit by the housing crisis, the state faces a projected shortfall of 33 percent for its next budget year. The good news is that the legislature has already approved actions to close that gap.

Colorado. The governor has proposed big cuts to try to eliminate a budget gap of at least 10 percent next fiscal year. Efforts to balance the budget are hobbled by laws that limit state revenue and require annual increases in K-12 spending.

Michigan. Michigan entered the recession long before any other state, and has continued to suffer as the auto industry gets hammered. Currently, unemployment is 14.7 percent – the worst in the nation – though it’s stabilizing.

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