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Over the past few years, a lot of states have found themselves contending with huge budget deficits. They've responded by firing workers and raising fees and taxes. Today, we begin a series of reports on state finances with an overview.
While the fiscal picture across the country is brightening, NPR's Jim Zarroli reports on some of the remaining challenges.
JIM ZARROLI, BYLINE: Arizona was hit hard by the real estate meltdown. And at the height of the recession, the state's finances got so weak that Arizona's leaders took an unprecedented step: They sold off most of the buildings in the capitol complex, then leased them back.
This year, in her State of the State address, Republican Governor Jan Brewer told legislators it was time to buy the buildings back.
GOVERNOR JAN BREWER: I'm asking that you send me a bill, by Statehood Day that allows me to buy back the capitol complex.
(SOUNDBITE OF APPLAUSE)
BREWER: And together, we can celebrate the burning of that mortgage.
ZARROLI: Brewer says Arizona can afford to buy the buildings back because its fiscal picture has stabilized.
Sue Urahn, of the Pew Center on the States, says after struggling for years with huge budget deficits, many states are seeing light at the end of the tunnel.
SUE URAHN: We are seeing improvements, meaningful improvements on the revenue side and states have cut costs significantly. So the fiscal situation is better in many cases.
ZARROLI: Of course, states like California and New York still have sizable deficits to plug. And states have achieved their new fiscal balance at a painful cost: Nearly 700,000 state and local government jobs have been lost since the recession.
And there have also been big cuts in spending for education, health care and law enforcement, says Nick Johnson of the Center on Budget and Policy Priorities.
NICK JOHNSON: But some of the things that states are doing are things that really once would have been kind of unimaginable. The depth of cuts in funding for K-12 education, for instance, have been very significant and I think a lot of governors are recognizing it.
ZARROLI: In states like Idaho and Virginia, Republican governors are calling for increases in funding for schools. Last year, Florida Governor Rick Scott tried to push through a corporate tax cut. This year, he wants a billion dollars in new education spending. Scott says Florida may have nice weather and great beaches...
GOVERNOR RICK SCOTT: But if Florida doesn't provide the intellectual talent to make our businesses competitive, we will become a footnote when this century's history is written.
ZARROLI: Florida can afford to spend more money on education because its high unemployment rate has ticked down. Sue Urahn says that as local economies improve, state tax revenues tend to increase. But Urahn warns that most states aren't out of the woods yet.
URAHN: On average, states are still six percent below the amount of revenue that they were bringing in before the recession. So, yes, things are improving, but they're still at a considerably lower level than they have been for several years.
ZARROLI: And there are big challenges looming. States get a quarter of their revenue from the federal government, which has budget problems of its own. After the debt ceiling standoff last year, Congress formed a committee to try to reduce the deficit. But it was unable to agree on a plan, triggering automatic spending cuts.
Nick Johnson says that will hurt states.
JOHNSON: The federal government is scheduled to make another round of very deep budget cuts in January of 2013. If those were to go forward, a very large chunk of those would directly hit state budgets in the form of cuts in grant programs.
ZARROLI: And because states pass a lot of money on to county and local governments, the impact of the federal cuts are likely to be felt throughout the economy. The hope is that the U.S. economy continues to improve and that the days of crippling budget deficits are at an end.
Jim Zarroli, NPR News.