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Old 01-12-2018, 05:21 PM
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Mary Pat Campbell
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
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25 States Start the Year Off With a Shortfall
As state legislatures convene this month, half of them will likely have to add fixing a budget shortfall to their to-do lists. An analysis by the government relations firm MultiState reports that 25 states are facing budget shortfalls this month. That’s better than the 31 shortfalls the firm found last January.

The size of the deficits vary widely. In some places -- such as Rhode Island and Vermont -- it's small enough that very little legislative action will be needed to resolve it, writes MultiState Analyst Ryan Maness. Other states may have to consider significant changes to solve their fiscal problems. Notably, New York is facing its biggest budget gap -- $1.7 billion -- in more than half a decade.

The states with shortfalls are mostly concentrated in oil and natural resource states, the Midwest and the Northeast.

The Takeaway: Tax reform and the changes it will have on state revenue could play a big role in whatever solution states come up with. Because federal tax reform eliminates many itemized deductions, a fair number of states will see an increase in revenue unless they decide to break from the federal government and keep those income deductions for taxpayers. For example, Oregon, which is facing a $1.7 billion deficit over two years, is expecting up to a $200 million windfall this year.

History has shown that tax reform windfalls can be tempting in places that are short on revenue. Three decades ago when federal changes scaled back tax benefits, such as eliminating the deduction for credit card debt interest, states had to decide whether they would do the same. While many sought full or partial revenue offsets, nine -- all with weak revenue conditions in 1986 and 1987 -- decided to keep the windfall from the federal reforms.

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