State Budget ‘01: The Perfect Storm

In its annual report on state spending, MTF reports that with tax collections weakening precipitously, achieving a balanced state budget for fiscal 2002 is likely to be the most difficult financial challenge in a decade. The report highlights three major trends which are converging to dramatically change the state's fiscal landscape: a sharp drop in the rate of growth of tax revenues amid widespread signs of a slowing economy; the phasing in of the Governor's $1.2 billion income tax cut, as well as another $600 million of previously approved tax cuts; and rapidly escalating health care costs and other nondiscretionary items. In sharp contrast to the fiscal plenty of recent years, the state is now facing the prospect of much tighter finances over the next several years. The report also provides an overview of spending trends in the major areas of state government.