The State Fiscal Crisis: Troubles Close to Home

Hit by the recession, falling revenues and a growing demand for services, Governors and lawmakers wrestle over how to overhaul taxes and spending

When their 1990 fiscal year ended on June 30, a few states didn't close their books -- they closed their governments instead. In Connecticut and Maine, state offices were shut down, public employees got involuntary furloughs, and angry Fourth of July revelers found their favorite state parks shuttered. No matter that the closings may have reflected a measure of showy brinkmanship by Governors locked in budget fights with their legislatures: the money problems of states this year are all too real.

The recession has cut deeply into state corporate and income tax revenues while also reducing consumer spending that generates sales...

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