State Budgets, Redistributive Policies, and the Great Recession

As a result of the Great Recession, state and local budgets are facing severe fiscal pressure. A recent study showed an unprecedented two-year decline in state spending, and the trend does not seem likely to end soon. Tax revenues were down 12 percent in 2009, and only slightly less in 2010. There have already been spending cuts in 46 states, including cuts to health care, education, and services to the poor, elderly, and disabled. At the same time cuts are being made, higher levels of unemployment and underemployment have increased the demand for state transfer programs.

With support from the Foundation, Howard Chernick and Cordelia Reimers of Hunter College will measure how states' budgetary exposure to the recession varied by the level of redistributive policies in the state, and how state fiscal policy responses to the recession affect lower-income households. In doing so, they will identify both the risks and long-term advantages of sub-national distribution in the U.S. They hypothesize that states with progressive tax structures and/or generous commitments to the disadvantaged are more fiscally vulnerable to the recession than states with less redistributive policies.