One misperception that we have spent significant energy countering is the belief that states and municipalities aren't doing anything to improve the condition of their finances. The reality could not be further from the truth. As the New York Times shows, state pension plans are one of the latest areas of reform. A number of states are starting to require (or are considering requiring) substantially higher pension contributions from their employees to reduce the amount of contributions that the state needs to make. One example is New York, where a proposal has been put forth to have all new state and New York city employees contribute six percent of pay up from the current level of three percent.
In addition to pension plan reform, states have closed substantial budget deficits over the past three fiscal years by either cutting spending or raising revenue. This is largely due to the fact that (unlike the federal government) almost all states are required to balance their budgets each fiscal budgeting period. The Center on Budget and Policy Priorities notes that states closed approximately $80 billion of budget deficits in 2009, $120 billion in 2010, $100 billion in 2011 and were expected to close around $140 billion in 2012. Looking at the numbers from a different perspective:
- 30 states have raised taxes.
- 31 have reduced health care service funding.
- 29 states and the District of Columbia have reduced service funding to the elderly and disabled.
- 34 and the District of Columbia have reduced funding for K-12 education.
- 43 have reduced funding for higher education.
- 44 states have made cuts that have affected their state work force (for example, layoffs, furloughs and reductions in pay).
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