States' prolonged budget distress means Medicaid stress

The collective deficit for state budgets for the coming year is the smallest yet since the recession ended, a new survey shows.

But at $54 billion, the gap underscores how states continue to struggle from the economic downturn, write Elizabeth McNichol, Phil Oliff and Nicholas Johnson at the Center on Budget and Policy Priorities, which conducted the survey.

State deficits “remain large by historical standards, as the economy remains weak and unemployment is still high,” they say.

As if to prove the point, the survey comes as Illinois lawmakers voted to slash Medicaid spending to address the state's budget woes, the Associated Press reports.

States may not fully recover for another seven years, should state tax revenue grow at last year's 8.3% rate, said the researchers. That's because of the “deep hole” states are in since the recession. Here's what the 2007-2009 recession looks like compared with the prior one:

Source: Center on Budget and Policy Priorities

You can follow Melanie Evans on Twitter: @MHmevans.