How to Cut State Spending

Published November 1, 2003

Facing record budget deficits and taxpayer opposition to higher taxes, many state legislators are turning for help to a 2002 report from the American Legislative Exchange Council and Manhattan Institute for Policy Research.

Show Me the Money: Budget-Cutting Strategies for Cash-Strapped States is a comprehensive evaluation of state budgets, offering 10 strategies for cutting state budget deficits, including short-, medium-, and long-term plans for reducing the cost of government.

Written by William Eggers, a Manhattan Institute senior fellow, the report offers 10 strategies and many specific recommendations to:

  • reduce workforce costs
  • impose broad-based spending cuts
  • reform entitlement programs
  • sell or lease government assets
  • introduce competition in service delivery
  • eliminate poorly performing programs
  • reward employees for saving money
  • reduce duplication and overlap
  • use technology to slash overhead
  • create cost-cutting brigades.

The ALEC study cites research by the National Conference of State Legislatures on how states closed budget gaps for their FY 2003 budgets: cutting spending (26), tapping state funds (23), using tobacco settlement funds (16), increasing taxes (16), tapping rainy day funds (12), and raising fees (10).

Examples of specific actions noted in the ALEC study include: cutting higher education spending (16 states), cutting corrections (14 states), tapping state funds (New York, Pennsylvania, Virginia), tobacco money (Pennsylvania, New Jersey), increases in taxes (Indiana, New Jersey, Pennsylvania, Tennessee), rainy day funds (Alaska, Ohio), and raising fees (Rhode Island, Virginia, Vermont).

“It is important to remember that no matter how successful state governments are in employing short-term measures to close deficits, the seed of fiscal crisis will remain. Only by fundamentally restructuring government will state policy makers be able to contain spending growth and return accountability to state finance,” notes the ALEC report. “The ten strategies will help states do both.”

For more information …

The full text of Show Me the Money is available through PolicyBot. Point your Web browser to, click on the PolicyBot button, and search for document #11130, or call the American Legislative Exchange Council at 202/466-3800.