Growing economic activity has helped improve the financial health of many states, with lower unemployment figures and increased consumer spending leading to smaller budget deficits and a reduction in potential cuts to vital programs and services.  A recently released report from the National Conference of State Legislators (NCSL), however, highlights the fact that many states are still struggling with continued fiscal restraints caused in large part by the Great Recession. 

In the NCSL report, twenty-two states listed issues with their budgets- including budget cuts, increasing obligations and revenue shortages- as their top fiscal priority for the upcoming 2012 legislative session. Spending on Medicaid, education, and pension obligations rounded out states top four fiscal concerns.

Numerous states that have reduced spending are again facing tough budgetary decisions as to how to balance a budget without reducing essential services.  Maryland officials, for instance, took steps to reduce their budget deficit in half last year, and will again be faced with more cuts to fill the remaining budget gap.  Illinois will also be faced with the prospect of additional budget cuts after last year’s budget was reduced by over $6.5 billion.

Retirement costs are a top fiscal concern for twelve states, including Illinois.  West Virginia, reeling from a large decrease in investment returns, is developing a plan to reduce their unfunded liabilities while Louisiana is drafting a proposal to increase employee contributions and reduce benefits.  While Illinois reformed its pension systems in 2010 for future employees, recent proposals have been drafted to deal with a history of underfunding and significant investment losses.   

With growing fiscal commitments, states across the nation will once again be forced to make some very difficult budgetary choices.