State Budget Nationally and in Massachusetts - Essay Example

The budget cuts ratified in no less than 46 states in addition to the District of Columbia ever since 2008, have been executed in all main sections of state services. The state services where the budget cut have been incurred include the health care segment in around 31 states, primary education segment in 34 states as well as the District of Columbia, higher education segment in 43 states, and services to the old as well as disabled in 29 states in addition to the District of Columbia among other areas.

The States have made these budget cuts for the reason that revenues earned by the States from income taxes as well as sales taxes, in addition to other revenue resources used to compensate for the above discussed state services decreased owing to the recession. Simultaneously, the requirement for these state services did not reduce and, in reality, the requirement got elevated as the number of people encountering economic complexities amplified (Johnson & Et. Al., “An Update on State Budget Cuts  At Least 46 States Have Imposed Cuts That Hurt Vulnerable Residents and the Economy”). . Throughout the period of dot-com bubble, Massachusetts considerably decreased the income tax rates, elevated the individual exemption level, cut the rate of tax on dividends as well as interest revenue into half in addition to endorsing a number of tax cuts for businesses.

The state fell short of recognizing that the economic upturn due to the dot-com success would not last for long (Massachusetts Budget and Policy Center, “Fiscal Fallout: The Great Recession, Policy Choices, & State Budget Cuts, Fiscal Years 2009-2012”). Consequent to these cuts in the tax rates and other alterations, the revenue collections from tax decreased to around 5 percent of the total state earnings by the end of the year 2009. Thus, there was a diminution of about $3 billion in revenue generated from tax.

This diminution in the tax revenue produced fiscal instability over the years. Massachusetts had not reinstated funding for necessary state services or made sufficient deposits into the state fund, in order to be equipped to face potential economic depressions. During the recent financial calamity, Massachusetts had depended principally on around $3 billion funds generated in the form of budget cuts and reserves to deal with the continuing budget shortfall. Massachusetts also collected about $1 billion in the form of taxes, and utilized more than $1.

5 billion per annum in the form of Recovery Act as well as associated financial support from the federal government in the last couple of years. The federal government funds performed an imperative function in assisting all the states in the US to protect the vital state services and prevent further tax increments