The Center recently made a presentation to the House Finance Committe on the status of the 2010-2011 budget, highlighting major uncertainty regarding critical aspects of that budget. The Obama adminsitration's proposed budget represents the second blow (following on the heels of the JUA deicision) to the stability of the current 2010-2011 New Hamsphrie state budget. How does President Obama's unveiling of the administration's proposed budget -- and estimates of the potential federal deficit -- change the landscape for budget makers?
As the table below shows (the data for which can be found here), the projected Federal deficit for 2010 (10.6%) doesn't reach the levels experienced during world war II (upwards of 30%). However, growth in the sources of the current deficits -- including war, Medicare and Medicaid -- don't have an end in sight without signfiicant policy changes.
Absent those policy changes, a robust economic recovery increasing tax receipts, or a significant change in tax polices, these potential deficits cast doubt about the possibility of the federal government continuing to support state spending in the future as they've done through the stimulus package. As the Center noted in the past, the budget as crafted is reliant on a significant share of one-time federal monies Moreover, the Obama administration will release the policy changes necessary to 'freeze discretionary spending' in February. And it is also likely that we are entering a period of significant conversations about some form of entitlement reform which would significantly impact state and local financiing.
--- Steve Norton, Executive Director, NH Center for Public Policy Studies
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