When President Obama stepped before a packed House chamber on Wednesday night he faced the same quandary known all too well to the 34 governors who have delivered State of the State addresses since the first of the year: how to simultaneously grow jobs while shrinking deficits. However, while the president's speech focused on job creation as priority number one, governors overwhelmingly focused on the path to achieving a balanced budget, ultimately resulting in spending reductions and job cuts.
The U.S. economy grew 5.7% in the last quarter of 2009, but as long as job growth remains anemic states will remain in the grips of a historic budget crisis. State legislatures across the country are heading back into session knowing they face cumulative budget shortfalls for 2010-2011 estimated by the Center for Budget and Policy Priorities to be as high as $350 billion. As most states are constitutionally bound to pass balanced budgets, they are forced to make tough choices.
Despite these challenges, governors touched upon many of the points made in President Obama's State of the Union in their own state of the state addresses, including initiatives to increase the quality of education, create jobs, and invest in the "new energy economy". Bold state leaders always find ways to innovate even in the face of dire fiscal constraints. However, many worthy initiatives will remain on hold in the face of mounting budget deficits.
So while the President is calling for a spending freeze, states still face spending cuts, including layoffs for thousands of teachers, police officers, and other state employees. While the President is calling for job creation tax credits, many states will be forced to find new revenue, placing new burdens on small businesses and regular citizens already struggling to make ends meet.
With an ambitious federal agenda, Congress and the administration must remain cognizant of the fiscal situations of the states. Our national response to the current crisis depends on having strong state partners at the table. We may have reached the backside of the Great Recession but the state fiscal crisis still lies ahead.