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State Government Handling Of Revenue Shortfalls

Describe how a state government handles revenue/funding shortfalls after the annual budget is set, after the fiscal year begins.

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The state government will try to implement the following strategies to handle the revenue/funding shortfall.

1.To Reduce Workforce Costs

One of the most effective short-term cost reduction measures is reducing workforce costs. The reason is simple: state employees' salaries and benefits account for a significant portion of states' costs. Most states will find it almost impossible to balance their budgets without impacting state employees. Fortunately, the innovative use of Web-enabled technology can help to ease the impact of workforce reductions on customer service, while an aging workforce will allow some workforce reduction without massive layoffs.

2. To Impose Broad-Based Spending Cuts

Across-the-board spending cuts are not the best way to reduce the size and cost of government. They provide little guidance about what services government should deliver or how they should be delivered. Moreover, cutbacks are usually restored as soon as tax revenues begin flowing back into government coffers, meaning long-term cost reductions are not achieved. But for governments needing to quickly identify budget savings?with no time to implement a more strategic process of "rightsizing" and restructuring?across-the-board spending cuts are often a necessary weapon in the budget-balancing arsenal.

3. To Modernize Government & Reform Entitlement Programs

States have no chance to solve their long-term budget problems without getting a handle on the rising cost of entitlements. Next to the recession, the runaway cost of Medicaid?the biggest budget cost driver in most states?is the biggest cause of the current state fiscal crisis. The most promising reform plans allow consumers to choose among multiple providers; customize benefits according to patients' needs and circumstances; target benefits to the truly needy; and recognize that the Medicaid population consists primarily of three distinct groups?older people, ...

Solution Summary

Revenue shortfalls in the government for revenue and funding shortfalls for an annual budgeting. The fiscal year discusses how the government handles the annual budget set.