State Fiscal Strategies for the 1990s: Balancing Budgets in a Recession

The fiscal crunch facing many states in FY 1991 has its rootsin the recession, federal mandates, election-year politics,and rapid growth in spending for Medicaid and corrections. Southernand midwestern states that made drastic cuts in response tothe 1981–1982 recession have fared relatively well, butstates in the Northeast have faced tax increases, layoffs, cutsin services, and prolonged conflict over state budgets. Althoughthe tax revolt has not led to appreciably lower taxes, it hasmade raising taxes more difficult, and has heralded a shiftto "boutique government," which may create further fiscal problemsin the long run. State tax increases and spending cutbacks mayalso delay recovery from the recession.