Reporting on the financial condition of the states: 2002-2010

The Governmental Accounting Standards Board (GASB) set forth a new model for financial reporting for state and local governments when it issued Statement No. 34 in 1999. Under the new financial reporting model, state and local governments are now required to develop financial statements that report on the operating activities and financial position of the government as a whole. This study provides a review of the financial health of state governments in the period before, during, and after the Great Recession. Virtually every state reported revenue losses and an operating deficit in 2009. 41 states continued to report an operating deficit in 2010. For a vast majority of the states, their 2010 general revenues were still below 2008 levels. Smaller governments (e.g., Alaska, Wyoming, and North Dakota) reported robust operating and financial positions. This is partially attributable to their natural resource base. Larger governments (e.g., California, Connecticut, Hawaii, Illinois, Massachusetts, and New Jersey) consistently reported weaker operating and financial positions.