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How has Massachusetts differed from other states in dealing with fiscal problems in the last couple of years - Essay Example

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Name: Instructor: Course: Date: Massachusetts, Other States and Fiscal Problems The recent national recession has produced and continues to produce, declines in local and state revenues, as well as an increased need for public programs as the state residents, lose jobs, insurance, ad income…
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How has Massachusetts differed from other states in dealing with fiscal problems in the last couple of years
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"How has Massachusetts differed from other states in dealing with fiscal problems in the last couple of years"

Download file to see previous pages Since the recession started, most states have closed more than $425 billion in shortfalls. All states have to balance operating budgets at least biennially unlike the federal government, which can go on providing services even with a financial downturn. Since federal economic assistance is to expire before the recovery of most state budgets, the states must address these shortfalls by a combination of tax increases and spending cuts. This paper aims to discuss how the state of Massachusetts has differed from other states in dealing with their fiscal problems. An annual update released by the US Census Bureau for local and state government finances provided national data for the year 2010. The amount of local and state taxes in Massachusetts as total personal income share was 10.2% in the fiscal year 2010. Using this measure, the state of Massachusetts, recorded lower taxation when compared to twenty-four other states (Ellwood 23). Measuring of taxes as a personal income share allows financial experts a meaningful comparison tool to compare states. Taxes act as the primary funding source for people living in various states that are provided to government for the provision of such functions as public education, safety nets, libraries, playgrounds and parks. The new data from the census shows that Massachusetts has a level of taxation ranging at 10.42%, below the average nationally that came at 10.59% in 2010 (Ellwood 23). If the state of Massachusetts had a taxation level at the average nationally, then local and state government would have had an extra $1.1 billion to spend during the fiscal year. Most states across the United States started implementing budget cuts in spring 2008 with the recession bringing weakened revenues sharply into focus. These cuts have increased given the persistently high unemployment. Most states cut funding by 4.2% in 2009 and a further 6.8% in 2010 despite the continued need for services that are funded by the state (Ellwood 25). However, in Massachusetts, a few diversions were noted, especially with budget cuts. Massachusetts has four major categories in their budget where they spent much more than other states despite/ instead of effecting cuts. These were public welfare, transit, veteran services and unemployment compensation. Public welfare, behind education, is the second largest category in the census encompassing temporary assistance for needy families, food stamp program and Medicaid. Unlike other states, Massachusetts has seen overspending in this category, indicated by the low ratings for welfare reform. TANF afforded flexibility to most states for the administration of benefits provided the goals set out by TANF were satisfied. A comprehensive study gave Massachusetts a low grade for the satisfaction of these goals, with a score of 34.9% and a ranking of forty-sixth out of fifty states (Ellwood 28). Unemployment compensation includes benefits that are funded by the federal government such as basic unemployment benefits and cash benefits for military and civilian employees. This includes shared expenditure, for example, extended employment for those states with high rates of unemployment. One significant indicator that Massachusetts overspends in this category compared to other states in this category is the fact that, in 2008s second quarter, Massachusetts recorded the second highest rate of weekly payment at $391.91 in comparison to the national average at $285.28 (Gold 250). Massachusetts’ ...Download file to see next pagesRead More
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