New Guidelines for State Budget Deficits Offer Pragmatic, Anti-Recessionary Approach


New Guidelines for State Budget Deficits Offer Pragmatic, Anti-Recessionary Approach

Boston, MA, March 30, 2010 – A new set of guidelines released today highlights the essential connection between progressive fiscal policy and the twin goals of state budget repair and economic recovery.

Virtually every state is groping for solutions to budget gaps of historic proportions. Most states have responded with counterproductive budget cuts or with cuts and minimal new revenue, often tied to unfair and unsound regressive tax vehicles. "As the newly-released Guidelines make clear,” said Karen Kraut, Director of the Tax Fairness Organizing Collaborative (TFOC), "neither approach even remotely resembles a 'best practice' during a recession."

While states, unlike the federal government, are limited in their ability to engage in deficit spending, Kraut said that this does not confine them to policies that deepen the recession or stifle recovery.

Released by United for a Fair Economy's Tax Fairness Organizing Collaborative (TFOC), and authored by economist David Shreve, a TFOC member affiliated with the Virginia Organizing Project, these guidelines delineate optimal fiscal policy during a budget crisis caused by recession, for any state seeking recovery, ongoing stability, and more widely shared prosperity.

Key points of the Guidelines:

To Close Recessionary Budget Gaps

  • Make money available through progressive tax reform, strategic borrowing, the timely use of rainy day funds, and building trust funds wisely.
  • Make tax increases and tax reform one and the same, including by repealing unworthy tax expenditures.
  • Encourage federal-state revenue sharing.

To Defend a More Progressive and Economically Sound Approach

  • Don't equate frugality or efficiency with budget austerity.
  • Challenge anti-tax activists who promote unfair and unsound taxes in the name of lower taxes.

"While the Guidelines make clear the need for federal government leadership and assistance, they also underscore the extent to which states have the ability to undertake much of the needed policy on their own," Shreve noted. "States have ample room for progressive tax reform that raises revenue, underwrites critical public investment, stimulates additional private investment, and maximizes job retention or creation."

While some state budgets are already set for 2011, nearly two-thirds of these have yet to be finalized.

"Because so many people's lives are being upended by this recession," remarks Kraut, "it is critical that states not settle for ineffective approaches likely to prolong the economic downturn or delay the recovery. These guidelines show us the way to avoid such wrong turns."

The Guidelines are available for download here.

UFE's Tax Fairness Organizing Collaborative is a network of statewide grassroots organizations that are educating and organizing for fair and adequate taxation at the state and federal levels.

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