Most of States in Fiscal Crisis, Survey Shows

The recession has left state treasuries in the worst shape in nearly a decade and a majority of states are being forced to slash spending, raise taxes or both, according to the annual fiscal survey issued Wednesday by the National Governors’ Assn.

The total of cash balances in state treasuries--which the survey calls “the most important single indicator of fiscal health”--has fallen to $5.9 billion, or just 2% of total expenditures. If Alaska--which has a large surplus--is left out, balances are estimated at only 1.5% of expenditures--the lowest level since 1983, when states were feeling the impact of the 1982 recession.

Because of the fiscal squeeze, 29 states have been forced to reduce previously approved budgets by a total of $8 billion in fiscal 1991, which ends June 30 in nearly all states. The most common money-saving measures have been program cuts, hiring freezes and layoffs.

In Rhode Island, for example, four welfare offices were closed to save on administrative costs while maintaining services. Ohio officials are considering a proposal to replace that state’s $300-million general assistance program with two smaller programs that together would cost only $195 million.

Twenty-eight states have raised taxes by more than $10 billion in fiscal 1991--the biggest increase since 1978. And 23 states plan additional tax increases in the next fiscal year, to raise a further $6.6 billion.

Next to the slump in the economy, the biggest cause of the fiscal pinch is rising Medicaid costs, in large part attributable to federal requirements for state financial support of expanded Medicaid programs, according to Raymond Scheppach, executive director of the Governors’ Assn. He pointed out that state spending on Medicaid, which now accounts for about 15% of all state spending, is rising 25% this year, after an 18% increase last year.

“When Congress passes still more costly Medicaid mandates, states often have to rob other critical programs--including prevention-oriented health services and social services--to pay the increased costs of these services,” Scheppach said.