State fiscal conditions in fiscal 2011 are somewhat improved when compared to the difficult fiscal environment that states faced in fiscal 2009 and fiscal 2010. This coincides with the economic recovery occurring nationally. However, states face numerous fiscal challenges as they enter fiscal 2012 including the withdrawal of significant funding that was provided through the American Recovery and Reinvestment Act of 2009 (ARRA). As unemployment remains elevated and consumer spending remains soft, state revenue collections continue to be affected by the economic downturn while at the same time pressure for state spending in areas such as healthcare and education continues to grow. Even though states are experiencing an improvement over one of the worst time periods in state fiscal conditions since the Great Depression, fiscal 2012 will still present states with difficult choices as they manage their budgets.

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