State and Local Budget Meltdown

During the good times, few state and local governments thought about what might happen if it all went wrong.

Polticians and policymakers failed to anticipate an inevitable bursting of history's greatest housing bubble. They did not foresee an end to the debt-fueled hyper-binge of consumer spending. They skimped on essential maintenance and infrastructure replacement projects and, instead, bought peace (and votes) from public employees with unaffordable pensions, wages and fringe benefits.

Now, though, it is all coming home to roost. In an article entitled "State Budget Troubles Worsen," the nonpartisan Center on Budget and Policy Priorities details a rapidly deteriorating state of affairs that should not have been a surprise to, well, anyone.

States are facing a great fiscal crisis.  At least 41 states faced or are facing shortfalls in their budgets for this and/or next year.  Over half the states had already cut spending, used reserves, or raised revenues in order to adopt a balanced budget for the current fiscal year — which started July 1 in most states.   Now, their budgets have fallen out of balance again.  New gaps have opened up in the budgets of at least 31 states plus the District of Columbia just four months after they struggled to close the largest budget shortfalls seen since the recession of 2001.  And these problems are expected to continue into next year.

Current estimates are that mid-year gaps total $24.3 billion — 6.6 percent of the budgets of the 29 states that have estimated the size of the gap — but they will almost certainly widen as the continuing economic turmoil causes revenues to come in below estimates in more states.

The 31 states facing mid-year shortfalls are Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Kansas, Kentucky, Maine, Maryland, Massachusetts, Mississippi, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virginia, and Wisconsin.  In addition, the District of Columbia faces a budget shortfall.  These budget gaps are in addition to the shortfalls that these and other states faced as they adopted their budgets for the current fiscal year.  At that time, 29 states faced a total of more than $48 billion in combined shortfalls.

Click here to read the rest. 

Comments

[Rocky]

The budget news in California is a worse than that:

Just when it looked as if California's budget situation was as daunting as it could get, it got worse.
The nonpartisan Legislative Analyst's Office delivered the grim news this week that revenues were falling even further than the alarming levels that prompted Gov. Arnold Schwarzenegger to call legislators back for a special session. The state is now on course toward a deficit of nearly $28 billion over the next 18 months. "This is a situation," said Schwarzenegger, " unlike any we've ever witnessed here." (from the San Francisco Chronicle 11/14/08)

I guess California can get behind GM, Ford and Chrysler for a Federal bailout, if the Chinese will lend Uncle Sugar some more money.

[Bob]

When corporate interests lines up with their hands out like common bums, it's very hard to convince government and taxpayers to do the right thing. Fortunately, the problem is about to be solved for us.

The problem we face is that we are entering a period of sharp economic contraction. Our economy is contracting because we have too much of everything. We have too much of everything because people, government and corporations have been using debt to finance unsustainable lifestyles for years.

The obvious solution is to let the economy contract. It is going to contract anyway, because it is driven by a consumer who is no longer playing the game. Let the weak fail. The strong will survive and set the stage for future growth.

But that's not what we do. We insist on propping up the weak. When an inordinate amount of resources are spent propping the weak, those resources cannot be used as they should be, and that makes the whole system vulnerable.

The actions are government is taking virtually assure the destruction of the American state. It is the height of insanity, when faced with a flat tire, to pump ever more air into it hoping that somehow it will hold.

We are done, and at the end of the day it is because we as a nation, from the corporate titan to the government bureaucrat to the "something for nothing" homeowner thought that scamming the system was the way to play the game.