Deloitte LLP has released a report examining states’ 2011 fiscal situation, offering advice to reduce state deficits.  Noting that cumulative state deficits are projected to rise to $119 billion despite large-scale budgetary reductions over the past two years, Deloitte cautions that states must take additional measures to address deficits.  Among other recommendations, the authors advocate implementation of the national health care reform law as one component of a deficit reduction strategy.  Particularly, Deloitte advocates health insurance exchanges, cost and quality reporting transparency, and health information technology as means to improve the cost-effectiveness of health spending.

From the report:  

Riders on London’s famed Underground are cautioned to “mind the gap” between the platform and train when boarding for their journey around the city. Similarly, U.S. state governors and legislators are advised to “mind the fiscal gap” between revenues and expenditures when seeking to balance their 2011 budgets.

Almost without exception, states are facing their most acute budget shortfalls ever. The Center on Budget and Policy Priorities has reported that the states’ cumulative budget shortfall for FY 2011 could reach $119 billion, even after the significant cuts taken over the past two years. Making matters worse, the federal government — hobbled by its own deficit — is no longer in a position to help states via stimulus dollars or bailouts; the economy remains uncertain; state programs, staff and benefits have already been cut; rainy day funds are depleted; and polls find voters opposed to tax increases. How governors and legislators address these 2011 budget challenges and choose to reduce near-term deficits may determine how well states fare on their journey to fiscally sustainable government.

Full Report: 2011 State Government Industry Outlook: Mind the Gap (PDF | 1.02 MB)

Deloitte LLP. (2011). 2011 state government industry outlook: mind the gap.