State income tax collections lower than expected, worsening budget problems

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Gov. Arnold Schwarzenegger (R-CA)
Gov. Arnold Schwarzenegger (R-CA)

It's been one month since the income tax deadline and many states are discovering that collections are much lower than expected. This could have a disastrous effect on state budgets, according to news reports.

A number of states, including California, Kansas, Illinois and Pennsylvania, have reported lower-than-expected revenues from income taxes, The Wall Street Journal reported. The shortfalls are likely the result of heavy unemployment during 2009. In California, for example, the state brought in 26.4% less income tax than anticipated—roughly $3.6 billion, according to the Journal.

Nearly all of the states—38, plus Puerto Rico—are reporting budget shortfalls for the coming year. Combined, the deficits are expected to top $89 billion, the Journal reported. California Gov. Arnold Schwarzenegger already (R) has proposed massive cuts to state welfare and health programs in an effort to close the budget gap. Medicaid, which funds most nursing home care, often has been the target of states' budget cuts.