December 23, 2002

by Iris J. Lav and Kevin Carey

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Wide-ranging state budget reductions already have been implemented for state fiscal years 2002 and 2003 as states have struggled to meet their balanced budget requirements.  Many governors began with what might be termed “first round” administrative reductions in state spending, including restrictions on out-of-state travel and moratoriums on equipment purchases.  Beyond that, personnel expenses in state agencies have been cut through a variety of measures, including hiring freezes, involuntary unpaid furloughs, early retirement programs, and state employee layoffs.  These personnel measures can leave agencies understaffed and can impair the ability of residents to access government services and benefits.  In addition, across-the-board percentage reductions in state agency budgets have been implemented in many states, either through executive action or as part of legislative budget-balancing plans.  In some cases these cuts trim administrative costs, but in other places they result in direct reductions in services to low-income families.

In addition, substantial specific cuts have been made in public services.  Examples of reductions in programs other than Medicaid are detailed below.  (For cuts in Medicaid, see the Center report: Proposed State Medicaid Cuts Would Jeopardize Health Insurance Coverage for One Million People, December 23, 2002.)  Note that the program reductions described below are excerpted from an October, 2002 Center report and do not include either cuts made since that time or reductions proposed by several governors in recent weeks.

Child Care

A recent report by the Children’s Defense Fund found that budget shortfalls have forced a number of states to reduce funding for child care, despite the fact that the number of low-income families needing child care services has grown significantly in recent years. [1]  The impact of funding cuts has been felt in a number of ways.


As a result of the weak economy and increasing unemployment rates, some states have projected increases in TANF cash assistance caseloads that would require additional spending on cash benefits.  A number of states are having difficulty maintaining TANF programs because reserves of federal TANF funds are dwindling.  Some states have already made cuts to TANF-funded programs.

TANF cuts of some kind of have been implemented in a number of other states, including Arizona, Arkansas, California, Connecticut, the District of Columbia, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Carolina, Ohio, West Virginia, and Utah.

Higher Education

State support of public universities has been significantly affected by state budget deficits.  Many state institutions of higher education have acted to make up for lost revenues by sharply increasing tuition, effectively shifting some of the burden of balancing state budgets to students and their parents.  Tuition increases also reduce access to higher education for low- and moderate-income families.  The College Board recently reported that tuition at four-year public colleges and universities increased by an average of 9.6 percent nationwide.  Significant tuition increases include:

Tuition increases of greater than eight percent were implemented at public universities in many other states, including Alabama, Alaska, Idaho, Illinois, Indiana, Iowa, Kentucky, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, South Carolina, Virginia, Washington, West Virginia, and Wisconsin.

K-12 Education

Many state policymakers have worked to minimize the impact of state budget deficits on local schools, given the public popularity of education spending.  But the fact that K-12 education costs represent the single largest expense in state budgets has made such reductions unavoidable in some states.[2]  Cuts in local school aid may result in increased local property taxes, as schools seek to replace lost state aid with increased local revenues.  Budget cuts can also result in scaled back programs, larger class sizes, and reductions in teacher compensation.

Aid to Local Governments

A number of states provide aid to local units of government such as counties, cities, and towns.  Some state policymakers have sought to shift some of the impact of state budget deficits to local governments by reducing the state aid those local units receive.

Many cities, counties, and towns operate programs that benefit low-income families.  State budget cuts that reduce local revenue can jeopardize the ability of municipalities to provide those services.

 Other Reductions in Public Services

Other state budget cuts have run the gamut of public services, from public safety to environmental protection to transportation.  Examples include:

End Notes:

[1] Low-Income Families Bear the Burden of State Child Care Cutbacks, Children’s Defense Fund, September 2002.

[2] A recent report from the U.S. Senate Committee on Health, Education, Labor, and Pensions and the House Education and Workforce Committee estimated that total projected state expenditures on K-12 education for 2003 are $6.7 billion below the amount necessary to accommodate normal increases in student population and per-student expenditures.

[3] USA Today, July 24, 2002.