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RECENT DEVELOPMENTS IN STATE FINANCES

State governments are becoming more fiscally prominent as the federal government cuts back its domestic nonentitlement programs. This report describes recent developments affecting state revenues and spending to provide a basis for understanding the current fiscal situation of the states. The weak national economy, the legacy of tax cuts enacted several years ago, and federal aid reductions have all played a role in creating a fiscal crisis for many states. The report also discusses information gaps, issues for future research, and prospective future policies.