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Many States Cut Budgets as Fiscal Squeeze Continues

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State government continues to shrink as states struggle to deal with the lingering state fiscal crisis. States cut expenditures over the last three years as they filled budget gaps that totaled about $250 billion. Despite the turnaround in the national economy, many states continue to face gaps in their fiscal year 2005 budgets. States remain reluctant to raise taxes and are running out of short-term fixes; they are once again turning to spending cuts to close those gaps.