States are entering their third fiscal year of a sustained economic and revenue contraction. Tax revenues have been declining since the first quarter of 2009 and are likely to continue their slide through 2012. Between FY 2009 and FY 2012 state budget deficits will total $300 billion in the states over the next three years. In FY 2011, states face a cumulative budget gap of $89 billion. Federal stimulus funds will be largely exhausted in the coming fiscal year with state source revenues unlikely to return to their pre-recession level. While this recession delivered a severe shock to state economies and revenues, the fiscal crisis in the states has developed over decades.

In this written testimony submitted to the Committee on Revenue and Taxation of the California Senate, Mercatus Senior Research Fellow Eileen Norcross discusses the premise of the California Enterprise Zone program. The program was designed in 1986 to bring economic development to high-poverty or distressed geographic areas. Ms. Norcross offers an evaluation of the program and offers alternative recommendations to California policymakers to consider to spur economic growth.

Examining the interplay between federal funding and state charter schools, focusing on the American Recovery and Reinvestment Act, and how competition in education could reform financing and outcomes.

New Jersey entered the current recession in a weakened fiscal and economic condition. The current recession is severe, but this fiscal dilemma is not new. The state has experienced structural deficits regularly over the past 20 years. This paper presents a series of reforms based on the successful experience of other governments. It begins with a background discussion of the challenges New Jersey will face in implementing these reforms by reviewing the state of the state and the loss of the “Old-Time Fiscal Religion,” the foundation of public finance until the Keynesian revolution of the 1940s. The paper explains the limits of public policy and government intervention and explores the importance of inter-jurisdictional competition and direct democracy, concluding with recommendations for institutional and policy reforms.