In this report we examine how ten states (Alabama, California, Colorado, Florida, Massachusetts, Michigan, New Jersey, New York, Texas, and Washington) from around the nation have responded to their budget crises in fiscal year 2004. While states vary in the depth of the budget pressures they faced, all were required to make difficult choices among spending reductions, tax increases, or other revenue measures. In general, we found states with few exceptions to be unwilling to engage in significant increases in personal or corporate income taxes or sales taxes. However, other revenue measures, e.g., cigarette and alcohol taxes, were adopted more broadly. States did continue the pattern of recent years of drawing on reserves or rainy day funds, transferring monies from dedicated trust funds and shifting spending or taxes across time periods to address current shortfalls.
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