States grapple with huge shortfalls

WASHINGTON, Jan. 13 (UPI) -- A tepid U.S. economy and worsening housing market are being blamed for a growing number of state's budget woes.

At least 13 states are facing mammoth budget shortfalls next fiscal year -- including California, New York and New Jersey -- and about a dozen other states are in serious financial trouble, The Washington Post reported Sunday.

Because most states, unlike the federal government, are not allowed by their constitutions to run budget deficits, state legislatures around the nation are grappling with how to make ends meet though spending cuts and tax increases.

Declining home sales, lower property values and a recent tide of home foreclosures have caused many states' revenue streams to falter, the newspaper reported.

"It's amazing how sales tax revenues are tied to the housing market," Iris Lav, deputy director of the Center on Budget and Policy Priorities, told the Post. "People aren't buying construction materials; people aren't furnishing new homes. Some states also have real estate transfer taxes."

The biggest state cash crunch is in California, where Gov. Arnold Schwarzenegger has declared a fiscal emergency over a $4.6 billion revenue shortfall that could grow to a $14 billion deficit by the 2009 fiscal year.