Which States Have Low Deficits?

eHow
May 23, 2011

The recession of the early 21st century has impacted every level of the economy, from the federal budget to individuals' bank accounts. Most states are experiencing budget deficits, meaning they have spent more than they have made in revenue. Overspending and insufficient taxation usually work together to grow budget deficits, but some states have fared better than others in balancing their finances.

States With No Deficit
Some states manage to have balanced budgets in fiscal year 2011, and some even have even revenue surpluses. Alaska, Arkansas, Montana and North Dakota carry no deficit. The governor and legislature of each state have priorities that help determine whether the state will be in deficit or surplus, and different factors explain how these states have stayed out of the red.

Alaska has technically accrued a budget deficit of around $475 million, but it has the good fortune of having a virtually untapped cash asset of $28 billion. The Permanent Fund, a 34-year-old tax stash that keeps growing through investments, pays out its dividends each year to Alaska residents and keeps the budget balanced. (See References 1)

Arkansas's governor Mike Beebe attributes his state's balanced budget to “conservative budgeting and cautious spending.” (See References 2) Montana governor Brian Schweitzer gave similar reasoning for his state's five-year balance. (See References 3) North Dakota's large surplus is largely due to its agricultural and energy commodities, which survived the recession better than most industries. (See References 4)

States With Low Deficits
Fourteen states carry deficits of less than 10 percent of the state's budget as of 2011. Geographically, many of them are clustered in the Midwest: Kansas, Indiana, Missouri, Nebraska and South Dakota. Like North Dakota, these low deficits may have stemmed from resilient agriculture and energy industries in the region. Other states with low deficits are Alabama, Idaho, Kentucky, Massachusetts, Michigan, New Mexico, Tennessee, Virginia and West Virginia.

Republican Leadership in Low Deficit States
Some states have industries that contribute significant revenue. Others have strict, conservative spending habits. Each state's financial story is different, but the states with low deficits have some factors in common.

With the exception of Arkansas, Kentucky, Massachusetts, New Mexico and West Virginia, all states with low or no deficits are controlled by Republicans (taking into consideration the governor, state House and state Senate). Because fiscal conservatism is a significant part of Republican ideology, modest spending in these states likely accounts for much of the balance.

Collective Bargaining in Low Deficit States
Thousands gathered in Wisconsin in early 2011 to protest Governor Scott Walker's proposal to end collective bargaining in the state. Legislators have floated this measure in several states as a means to balance budgets, but the debate continues over its effectiveness. Watchdog website PolitiFact found that states without collective bargaining have as many, if not more, budgetary problems than states that allow public employees to unionize.

Among the 18 states with no or low deficits, only five have collective bargaining. This statistic does not necessarily indicate a correlation, but it offers compelling evidence that ending collective bargaining may be an effective measure for lowering budget deficits.

References
"The Economist"; Alaska's Budget: Plucking the Golden Goose; March 2004
Sunshine Review: Arkansas State Budget
"Ravalli Republic"; Viewpoint: Montana One of Two States Not Running a Deficit; Brian Schweitzer; September 1, 2010
"The Wall Street Journal"; In North Dakota, the Good Times Are Still Rolling; Amy Merrick; June 5, 2009
PolitiFact Ohio: David Pepper Says Budget Woes in States Without Public Employee Collective Bargaining Top Ohio's

Resources
AARP: State Budget Gaps for FY 2011
CNN: State Budget Deficits