WASHINGTON, April 25, 2011 /PRNewswire/ -- A new Deloitte analysis of the current fiscal standing of state governments examines the potential impact on states' long-term fiscal sustainability based upon how governors and legislators address this year's budget challenges and deficit reductions. Deloitte's analysis, "2011 State Government Industry Outlook: Mind the Gap" makes it clear -- maintaining the status quo will not work.
According to the Center on Budget and Policy Priorities, the cumulative budget shortfall for states in fiscal year 2011 could top $119 billion even after earlier cuts. In order to manage this large-scale budget imbalance, Deloitte's analysis asks states to "mind the fiscal gap" between revenues and expenditures, and address practices that contribute to current challenges. Prior practices, such as focusing more on short-term deficits than changing spending patterns are forcing legislators to ask difficult questions.
However, the good news in Deloitte's analysis is that states are now, more than ever, in a position to develop a new, more responsive and responsible operating model. And, by letting go of the status quo, states can address their financial imbalances and reach fiscal sustainability.
"States' budgets face an unprecedented level of deficit that ad hoc measures aimed at closing fiscal gaps, such as workforce reductions and increased taxes, alone cannot address," says Robert N. Campbell III, vice chairman and U.S. state government sector leader, Deloitte LLP. "Despite this grim outlook, state governments have a unique opportunity to reshape the way they approach budgets and planning to reach solid ground."
The 2011 State Government Industry Outlook offers executive and legislative leaders the following recommendations to help achieve financial stability:
- Improve State Competitiveness – State legislators can reshape and generate economic development opportunities by promoting innovation and collaboration and encouraging education reform and public-private partnerships.
- Implement Health Care Reform – Health care costs are a huge state challenge -- with or without health care reform. States have a limited time to implement processes to comply with reform provisions. By encouraging reform in impact areas, including insurance exchanges, transparency and health information technology, state leadership can maintain cost-effectiveness.
- Capitalize on Technology Trends – Notably, by developing cloud computing models and incorporating data and analytics into state government, states can better manage growing technology. In addition, protecting sensitive information shared over the Internet continues to be a priority even though it will mean more capital investment.
To achieve a long-term budget solution, Deloitte suggests states consider and institute sweeping, systemic changes that will require persistence on the part of political leaders and citizens. These changes will involve a fundamental alteration in how states conduct business and deliver service, and how they finance and administer agencies and programs. The Deloitte analysis further advises that by addressing these needs and refusing to settle for the quick return solution, state's can be better positioned to move towards financial stability and long-term sustainability.
To download a copy of the study, please visit: www.deloitte.com/us/2011GovtOutlook.
For more information about Deloitte's U.S. State Government practice, please visit: http://www.deloitte.com/us/stategovernment.
As used in this document, "Deloitte" means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.