The revenue shortfalls have forced states to tighten spending. At least 23 states had already made midyear budget cuts, totaling nearly $5 billion, even before the budget battles began this month.
States are also bracing for the potential impact of new policies out of Washington that threaten to put great financial strain on their budgets.
One of those changes is within the Republican-proposed health-care reform bill, which aims to slash government spending on Medicaid coverage. (The current program, the Affordable Care Act, had originally been created for low-income families and was expanded in 32 states.)
Under current law, the federal government shares the cost with the states, which saw their Medicaid spending rise by a median 5.2 percent in fiscal 2017, according to the National Association of State Budget Officers. Medicaid spending is expected to rise by another 4.2 percent in fiscal 2018.
More from America’s Top States for Business:
Connecticut is facing a business migration crisis
New York is offering free college — California may be next
10 crumbling states most in need of Trump’s $1 trillion infrastructure plan
But if approved, the latest Republican health-care bill would slash Medicaid funding under the current law by some $772 billion over 10 years, according to the Congressional Budget Office.
States are also proceeding even more cautiously than usual due to uncertainty about other possible changes in federal policy.
One of those involves tax reform, and the possible loss of the federal income-tax deduction for state and local taxes. That would increase the effective cost of those taxes to state residents.
States are also waiting for clearer signs about the prospects for increased federal spending on infrastructure, one of the few policies that has drawn bipartisan support in Congress. Despite that general agreement, there has been little progress on legislation to boost funding for state infrastructure projects.