Without question, state expenditures have been significantly impacted by the national recession that began in December 2007. The economic downturn has created a unique and in some ways unprecedented fiscal situation for states. Spending from state funds (general funds and other state funds combined) declined in both fiscal 2009 and estimated fiscal 2010, marking the first occurrences in the 23-year history of the State Expenditure Report. The decline in spending from state funds was precipitated by a rapid reduction in state revenue. During the two-year period from fiscal 2008–2010 state revenues decreased nearly 12 percent, or by $78.5 billion. It should be noted that not all components of state expenditures have declined during the recent downturn. Spending from federal funds increased sharply in both fiscal 2009 and fiscal 2010. The increase in federal funds is directly attributed to the passage of the American Recovery and Reinvestment Act of 2009 (ARRA). Due to the influx of additional federal dollars, total state expenditures grew modestly in both fiscal 2009 and fiscal 2010. Looking beyond fiscal 2010, states are very concerned that state revenues will not have recovered to pre-recession levels by the time the additional federal funds wind down.

This edition of the report includes data from actual fiscal 2008, actual fiscal 2009, and estimated fiscal 2010.

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