Less than Meets the Eye?
Last Thursday, Federal Reserve Chairman Ben Bernanke caused a stir when he warned that spiraling government spending could spark a "vicious cycle" of even bigger federal budget deficits.
"The longer we wait, the more severe, the more draconian, the more difficult the objectives are going to be" in responding to the crisis, he said. "The right time to start was about 10 years ago."
Yet while the main focus was on the fiscal mess in Washington, there is also plenty of red ink coursing through state government finances.
On Friday, for example, Governor Jennifer Granholm said Michigan's budget woes are "at a crisis level." According to the Lansing State Journal, the comments came
one day after administration officials said the state faces an $800 million deficit this year alone. If the Single Business Tax, which will be eliminated at the end of the year, is not replaced, Granholm estimated Michigan could be facing a $3 billion shortfall over the next two years.
And last Wednesday, officials raised the alarm about Massachusetts' state finances. According to the Worcester Telegram & Gazette, state revenue officials
predict a sharp fall-off in state revenue growth in the fiscal year that begins in July, putting a chill on prospects for new state spending next year, and boosting pressure for possible tax increases....
Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, which represents Boston-area businesses, said the slump in revenue growth will make it hard for the state to balance next year's budget without "gimmicks" or using its $2.1 billion rainy day fund.
In fact, several states around the country have recently voiced concerns about sizeable budget deficits and an array of looming fiscal problems. These include California, New Jersey, New York, North Carolina, Wisconsin, Maryland, Wisconsin, and Alabama, among others.
It seems that while the economy is booming, the health of public sector finances is not.
Perhaps there is less there than meets the eye?
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