The worst recession since the Great Depression is causing the steepest decline in state tax receipts on record, and Georgia is among the hardest hit, according to data from a state policy think tank.
The Center on Budget and Policy Priorities, a nonpartisan group, says states such as Georgia, Tennessee and Alabama are having to make sharp cuts whose effects ripple through their reeling economies.
When laid-off teachers, social workers and state health administrators can't spend as much in their communities, their income and sales tax contributions are lowered, the center says.
It's something of a vicious cycle with no single, easy fix, according to analysts.
"States making big cuts to services (and the jobs that provide them) are actually harming the economic recovery," said Phil Oliff, an analyst for the Washington, D.C.-based Center on Budget and Policy Priorities.
Georgia officials cut taxes in 2008, and now face a projected $4.2 billion fiscal 2011 shortfall - 24.3 percent of the state's 2010 budget. To make ends meet, the state has eliminated more than 7,000 jobs, according to Gov. Sonny Perdue's spokesman, Bert Brantley.
"It's hard to cut a budget to get a balanced budget when a lot of it is wrapped up in people," Mr. Brantley said Thursday. "Hopefully, most of them had other jobs or are retirees so they are not on the unemployment rolls, but they are off the state payroll."
Tennessee and Alabama face smaller challenges, according to data from the Center on Budget and Policy Priorities.
Alabama's 2011 shortfall is $586 million, or 8.2 percent of its 2010 budget.
Tennessee's 2011 shortfall was $1 billion in a $28.9 billion budget, or 10 percent of its previous year's budget.
"Tennessee has worked to manage its budget through the recession, and was in better financial condition when the downturn hit," said Lola Potter, a spokeswoman for Tennessee state government.
"We have a Rainy Day Fund - many states don't - and ours was at a record high $750 million, when the recession hit."
But, she said, "it will be about half that amount by the end of this fiscal year."
Still, she said, officials cut state agencies by an average of 25 percent, reducing spending by $1.5 billion. Gov. Phil Bredesen's 2010-11 budget proposal brought the number of state positions eliminated to 2,359 since 2009, not including higher education, Ms. Potter said.
The budget also will require a transfer of $170 million from unobligated TennCare reserves to the general fund. All told, officials have used more than $500 million from two reserve funds to stay afloat during the downturn, she said.
Nationally, 47 states and the District of Columbia have shortfalls tallying $112.2 billion, according to state data collected by the Center on Budget and Policy Priorities.
Mr. Oliff said federal aid, including the stimulus, has helped states cope while lessening the double whammy to the economy, but the problem is too big for any one solution.
"That aid is running out," he said, adding that he thinks the stimulus money should be extended.
"And the states need to help themselves by taking a balanced approach - one that includes revenues and not just massive cuts in services," he said.
State officials, however, likely will remain reticent to embrace new taxes.
"There are no good ways to balance a budget," said Mr. Brantley "Raising taxes does further damage to the economy because it hurts (people) when they are already hurting."