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State Governments Face Budget Crisis

46 states have cut services to reduce their deficit

"I just don't know when or how much," she said. The Republicans in the U.S. House of Representatives targeted WIC for a 10 percent cut from last year's spending level. The measure failed in the Senate, but the uncertainty for next year concerns Darcangelo.

"Cuts in WIC may look good this year as a way to keep the political promises," she said, "but are the politicians really thinking about the far-reaching consequences?"

While public employee pensions have gotten a lot of attention, they account for less than 4 percent of most states' budgets. But unlike areas in which states have the discretion to make cuts, pensions must be paid.

Despite the political unpopularity of such a move, more than 30 states have raised income, sales or business taxes since the recession started, according to the Center on Budget and Policy Priorities. A few states, however, are going the other way, lowering corporate taxes in hopes of spurring economic growth.

"That's like saying you can run faster if you cut your foot off," says Jon Shure, deputy director of the State Fiscal Project at the budget and policy center. Cutting taxes will only make deeper spending cuts necessary, he says. The center urges governors to use rainy-day funds or raise taxes to replace lost revenue.

But Tad DeHaven, a budget analyst with the Cato Institute, which favors limited government, blames the states' budget woes on one simple cause: "They spend too much."

The states, he says, are "looking to Washington to bail them out" when the federal government already provides one-third of state revenues.

States have been too generous with employee benefits, DeHaven argues. Half of the total annual spending by state and local governments goes to employee compensation, according to the U.S. Bureau of Economic Analysis.

"Previous politicians have made promises that current politicians are on the hook for," DeHaven says.

While the states' financial picture is bleak, some analysts see hope down the road. More provisions of the health reform law will take effect in 2014, including an expansion of Medicaid to include certain adults under 65. The federal government will pick up the cost of covering the newly eligible recipients for the first few years.

"We're moving in the right direction," says Ron Pollack, executive director of Families USA, a group that represents health consumers. "Significant relief has been provided and more is on the way through the Affordable Care Act."

What's needed most, say Pollack and other analysts, is economic recovery. But no one knows when that will come.

Marsha Mercer is a freelance writer based in Virginia who covers public policy issues.

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