Almost half of states expecting budget woes in FY 2009

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The financial crisis has battered the budgets of states across the country, according to a new report. That could bode badly if the government proceeds with regulations to cut Medicaid.

A total of 23 states, along with Puerto Rico, are expected to have a collective deficit of $26 billion in fiscal year 2009, according to a new report issued by the National Conference of State Legislatures. Weak revenue growth as a result of the housing market collapse has dragged individual states' economies down to levels lower than experts had expected. The Medicaid cuts proposed by the Bush Administration would only serve to deepen those deficits. Some 13 states have a stable or optimistic general fund revenue outlook for fiscal year 2009.

"Whether or not the national economy is in recession is almost beside the point," said NCSL Executive Director William Pound. "The fiscal situations have  declined so much in some states that they appear to be in a recession."