Coming Up Short...er

It's not fun being a doomsayer. It really isn't.

In spite of what some say, I'd much rather live in a world where the day-to-day struggles are easily manageable, the future looks exceptionally bright, and one can readily enjoy life's simple pleasures -- like the beautiful weather we are having in New York today -- without having to worry about the system falling apart and crashing down on top of us.

But anyone who takes the time to carefully look around and analyze the situation can see that many of the excesses and imbalances that brought us to this point -- and which inspired me to write my March 2007 book, Financial Armageddon -- are still there.

While the government may have bought some time with its decision to abandon prudence and rationality and, instead, mortgage our children's future to the hilt (mainly to help its powerful friends in the financial world), the problems have not gone away.

If anything, many of them have gotten a lot worse, suggesting the eventual fallout will be massive and far-reaching. Take, for example, the meltdown in municipal finances. According to a new report, "New Fiscal Year Brings No Relief From Unprecedented State Budget Problems," from the Center on Budget and Policy Priorities, a non-profit think tank, it seems that the worst is yet to come.

The unprecedented state fiscal problems brought on by the worst decline in tax receipts in decades show no signs of letting up. On July 1 — the start of the fiscal year in most states — an unusually high number of states were still struggling to adopt budgets for fiscal year 2010. Most states have adopted budgets that closed the shortfalls they faced with a combination of federal stimulus dollars, service reductions, revenue increases, and funds from reserves. But these budgets are already falling out of balance as the economy has caused state revenues to decline even more than projected. States will continue to struggle to find the revenue needed to support critical public services for a number of years.

The Center’s most recent survey of state fiscal conditions found many signs of the depth of the state budget crisis.

• At least 48 states have addressed or still face shortfalls in their budgets for fiscal year 2010 totaling $168 billion or 24 percent of state budgets.
• An unusual number of these states are still struggling to balance their 2010 budgets two months after the start of the fiscal year. Three states — Arizona, Michigan, and Pennsylvania — have not yet adopted budgets for 2010. In addition, new shortfalls have opened up in at least 15 of the states that have adopted budgets — California, Colorado, Georgia, Hawaii, Kansas, Kentucky, Maryland, New Mexico, New York, Rhode Island, Utah, Vermont, Virginia, Washington, and Wyoming — plus the District of Columbia . These additional gaps — some of which have already been addressed[1] — totaled $28 billion.
• The states’ fiscal problems will continue into the next fiscal year and likely beyond. At least 36 states have looked ahead and anticipate deficits for fiscal year 2011. These shortfalls total $74 billion — 15 percent of budgets — for the 30 states that have estimated the size of these gaps by comparing expected spending with estimated revenues, and are likely to grow as more states prepare projections and revenues continue to deteriorate.
• Combined budget gaps for the next two fiscal years — those already mostly closed for 2010 and those projected for 2011 — are estimated to total at least $350 billion.

Figure 2’s budget shortfall figures for fiscal years 2009 and 2010 show the national recession’s impact on state budgets. These figures are the total size of the shortfall identified by each state listed. In many cases all or part of this shortfall has already been closed through a combination of spending cuts, withdrawals from reserves, revenue increases, and use of federal stimulus dollars.

Figure 2 also compares the size and duration of the shortfalls that occurred in the recession of the first part of this decade to shortfalls this time. The current recession is more severe — deeper and longer — than the last one, and state fiscal problems have proven to be worse and are likely to remain so. Unemployment, which peaked after the last recession at 6.3 percent, has already hit 9.4 percent, and many economists expect it to rise higher. This would further reduce state income tax receipts and increase demand for Medicaid and other essential services that states provide. With consumers’ reduced access to home equity loans and other sources of credit, sales tax receipts have fallen more steeply than in the last recession. These factors suggest that state budget gaps will continue to be significantly larger than in the last recession. All but a handful of states have had to face or are still dealing with shortfalls in fiscal year 2010 that total some $168 billion. If, as is widely expected, the economy does not begin to significantly recover until the some time in calendar year 2010 and unemployment remains high through 2010, state shortfalls are likely to be even larger in fiscal year 2011 (which begins in July 2010 in most states). The deficits over the next two fiscal years — 2010 and 2011 — are likely to be more than $350 billion. [2]

Several factors could make it particularly difficult for states to recover from the current fiscal situation. Housing markets might be slow to fully recover; their decline already has depressed consumption and sales tax revenue as people refrain from buying furniture, appliances, construction materials, and the like. This also would depress property tax revenues, increasing the likelihood that local governments will look to states to help address the squeeze on local and education budgets. And as the employment situation continues to deteriorate, income tax revenues will weaken further and there will be further downward pressure on sales tax revenues as consumers are reluctant or unable to spend.

Unlike the federal government, the vast majority of states are governed under rules that prohibit them from running a deficit or borrowing to cover their operating expenses. As a result, states have three primary actions they can take during a fiscal crisis: draw down available reserves, cut spending, and raise taxes. States already have begun drawing down reserves; the remaining reserves are not sufficient to allow states to weather the remainder of the recession. The other alternatives — spending cuts and tax increases — can further slow a state’s economy during a downturn, which produces a cumulative negative impact on national recovery as well.

Some states have not been affected by the economic downturn, but the number is dwindling. Mineral-rich states — such as New Mexico, Alaska, and Montana — saw revenue growth as a result of high oil prices. However, the recent decline in oil prices has begun to affect revenues in some of these states. The economies of a handful of other states have so far been less affected by the national economic problems.

In states facing budget gaps, the consequences are severe in many cases — for residents as well as the economy. As the 2009 fiscal year ended and states planned for 2010, budget difficulties have led some 41 states to reduce services to their residents, including some of their most vulnerable families and individuals.[3]

For example, at least 27 states have implemented cuts that will restrict low-income children’s or families’ eligibility for health insurance or reduce their access to health care services. Programs for the elderly and disabled are also being cut. At least 24 states and the District of Columbia are cutting medical, rehabilitative, home care, or other services needed by low-income people who are elderly or have disabilities, or significantly increasing the cost of these services.

At least 25 states are cutting or proposing to cut K-12 and early education; several of them are also reducing access to child care and early education, and at least 34 states have implemented cuts to public colleges and universities.

In addition, at least 42 states and the District of Columbia have made cuts reducing the size or work time of state government employees. Such cuts not only often result in reduced access to services residents need, but also add to states’ woes because of the impact on the economy from less consumer activity.

If revenue declines persist as expected in many states, additional spending and service cuts are likely. Budget cuts often are more severe later in a state fiscal crisis, after largely depleted reserves are no longer an option for closing deficits.

Expenditure cuts and tax increases are problematic policies during an economic downturn because they reduce overall demand and can make the downturn deeper. When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals. In all of these circumstances, the companies and organizations that would have received government payments have less money to spend on salaries and supplies, and individuals who would have received salaries or benefits have less money for consumption. This directly removes demand from the economy. Tax increases also remove demand from the economy by reducing the amount of money people have to spend — though to the extent these increases are on upper-income residents that effect is minimized because much of the money comes from savings and so does not diminish economic activity.

The federal government — which can run deficits — can provide assistance to states and localities to avert these “pro-cyclical” actions.

TABLE 1: STATES WITH FY2010 BUDGET GAPS
	FY2010 before budget adoption	FY2010 mid year gap	FY2010 Total	FY2010 Total – % of General Fund Budget
Alabama	$1.2 billion	0	$1.2 billion	16.7%
Alaska	$1.3 billion	0	$1.3 billion	30.0%
Arizona	$4.0 billion	0	$4.0 billion	41.1%
Arkansas	$146 million	0	$146 million	3.2%
California*	$26.0 billion	$19.5 billion	$45.5 billion	49.3%
Colorado	$1.0 billion	$384 million	$1.4 billion	18.6%
Connecticut	$4.2 billion	0	$4.2 billion	23.9%
Delaware	$557 million	0	$557 million	17.6%
District of Columbia	$650 million	$150 million	$800 million	12.7%
Florida	$5.9 billion	0	$5.9 billion	22.8%
Georgia	$3.1 billion	$1.0 billion	$4.1 billion	23.8%
Hawaii	$682 million	$297 million	$978 million	19.1%
Idaho	$411 million	0	$411 million	16.4%
Illinois*	$13.2 billion	0	$13.2 billion	37.7%
Indiana	$1.1 billion	0	$1.1 billion	7.5%
Iowa	$779 million	0	$779 million	13.2%
Kansas	$1.4 billion	$183.2 billion	$1.6 billion	25.6%
Kentucky	0	$1.1 billion	$1.1 billion	11.3%
Louisiana	$1.8 billion	0	$1.8 billion	21.6%
Maine	$640 million	0	$640 million	21.4%
Maryland	$1.9 billion	$700 million	$2.6 billion	18.7%
Massachusetts	$5.0 billion	0	$5.0 billion	17.9%
Michigan	$2.8 billion	0	$2.8 billion	12.4%
Minnesota	$3.2 billion	0	$3.2 billion	21.0%
Mississippi	$480 million	0	$480 million	9.6%
Missouri	$923 million	0	$923 million	10.3%
Nebraska	$150 million	0	$150 million	4.3%
Nevada	$1.2 billion	0	$1.2 billion	37.8%
New Hampshire	$250 million	0	$250 million	16.2%
New Jersey	$8.8 billion	0	$8.8 billion	29.9%
New Mexico	$345 million	$432.6 million	$777.6 million	14.1%
New York	$17.9 billion	$2.1 billion	$20.0 billion	36.1%
North Carolina	$4.6 billion	0	$4.6 billion	21.9%
Ohio	$3.3 billion	0	$3.3 billion	12.3%
Oklahoma	$777 million	0	$777 million	13.6%
Oregon*	0	0	0	0.0%
Pennsylvania	$4.8 billion	0	$4.8 billion	18.0%
Rhode Island*	$590 million	$65 million	$655 million	21.3%
South Carolina	$725 million	0	$725 million	12.5%
South Dakota	$32 million	0	$32 million	2.9%
Tennessee	$1.0 billion	0	$1.0 billion	9.7%
Texas	$3.5 billion	0	$3.5 billion	9.5%
Utah	$721 million	$279 million	$1.0 billion	19.8%
Vermont	$278 million	$28 million	$306 million	27.3%
Virginia	$1.8 billion	$1.5 billion	$3.3 billion	20.1%
Washington	$3.4 billion	$195 million	$3.6 billion	23.3%
West Virginia	$184 million	0	$184 million	4.9%
Wisconsin	$3.2 billion	0	$3.2 billion	23.2%
Wyoming	0	$32 million	$32 million	1.7%
Total	$139.4 billion	$27.9billion	$167.6 billion	24.3%
Notes: States in italics had not adopted FY2010 budgets as of the date of this report. Some or all of the pre-budget shortfalls have already been addressed. *The mid-year shortfall shown for California ($19.5 billion) differs from the often-cited $26.3 billion figure because it does not include the $5.8 billion of potential revenues affected by the May ballot measures to avoid double counting and does not include $1 billion to be deposited in reserve. At least $3.2 billion of the $13.2 billion gap in Illinois has not been closed. Oregon has a two-year budget. The size of the projected shortfall is shown in Table 2. Rhode Island’s mid-year shortfall of $65 million is a deficit carried over from FY2009.

TABLE 2: STATES WITH PROJECTED FY2011 BUDGET GAPS
	Size of Gap	Percent of FY2010 General Fund Budget
Alabama	DK	na
Alaska	$677 million	15.3%
Arizona	$2.6 billion	26.7%
California	$15 billion	16.3%
Colorado	$1.3 billion	16.9%
Connecticut	$4.4 billion	25.0%
Florida	$5.0 billion	19.3%
Georgia	$1.3 billion	7.2%
Hawaii	$320 million	6.2%
Illinois	$10.4 billion	28.2%
Indiana	$316 million	2.2%
Iowa	DK	na
Kansas	$412 million	6.7%
Kentucky	$598 million	6.2%
Maryland	$1.2 billion	8.7%
Massachusetts	DK	na
Michigan	$2.7 billion	11.9%
Mississippi	$544 million	10.9%
Nebraska	$150 million	4.3%
New Hampshire	$250 million	16.2%
New Jersey	$6.0 billion	20.4%
New Mexico	$318 million	5.8%
New York	$4.6 billion	8.4%
North Carolina	$4.4 billion	21.0%
Ohio	$1.1 billion	4.1%
Oklahoma	$725 million	12.7%
Oregon	$4.2 billion	29.0%
Pennsylvania	$4.1 billion	15.4%
Rhode Island	$197 million	6.4%
Utah	$700 million	13.9%
Vermont	$82 million	7.3%
Virginia	DK	na
Washington	DK	na
West Virginia	$243 million	6.4%
Wisconsin	DK	na
Wyoming	$147 million	8.0%
Total	$73.9 billion	15.0%
Notes: An entry of "DK" in Size of Gap means that an estimate of the size of the projected gap in that state is not yet available. For some states, these estimates reflect projected deficits after taking use of federal stimulus funds into account.

States Have Restrained Spending and Accumulated Rainy Day Funds

The current situation has been made more difficult because many states never fully recovered from the fiscal crisis of the early part of the decade. This heightens the potential impact on public services of the shortfalls states now are projecting.

State spending fell sharply relative to the economy during the 2001 recession, and for all states combined it still remains below the fiscal year 2001 level. In 18 states, general fund spending for fiscal year 2008 — six years into the economic recovery — remained below pre-recession levels as a share of the gross domestic product.

In a number of states the reductions made during the downturn in education, higher education, health coverage, and child care remain in effect. These important public services were suffering even as states turned to budget cuts to close the new budget gaps. Spending as a share of the economy declined in fiscal year 2008 and is projected to decline further in 2009 and again in 2010.

One way states can avoid making deep reductions in services during a recession is to build up rainy day funds and other reserves when the economy is growing. At the end of fiscal year 2006, state reserves — general fund balances and rainy day funds — totaled 11.5 percent of annual state spending. Reserves can be particularly important to help states adjust in the early months of a fiscal crisis, but generally are not sufficient to avert the need for substantial budget cuts or tax increases. In this recession, states have already drawn down much of their available reserves; the available reserves in states with deficits are likely to be depleted in the near future.

For those who are looking for an overview that is a bit less dry or wonkish, The Automatic Earth just happened to include a round-up of horror stories from the world of state and local government finances in its latest post, entitled "September 4 2009: States of Shock":

California $80 Million in Unemployment Insurance Being Paid out Per Day in California

• [..] earlier this week 143,000 unemployed Californians exhausted their unemployment benefits.  Now, you might think that this is simply a function of a normal recession. It is not. In fact, many of these people have exhausted their 26 weeks of benefits plus three additional extensions. 
  
• Another bill has been introduced to extend benefits for a fourth extension bringing the amount of unemployment insurance available for up to 92 weeks!  This is no minor recession but a major economic shift in our economy.  Without the extension being passed there will be 264,000 Californians with no unemployment insurance by the end of the year. 
  
• So far this year California has dished out some $11 billion in unemployment insurance. This is the biggest amount on record, dwarfing the previous record set last year at $8.1 billion. 
  
• Weekly benefits range from $65 on the lower end all the way up to $475.  The insurance people receive depends on their previous income.  The average weekly amount is $319.

States Shut Down to Save Cash

Furloughs may provide a political benefit to politicians who must placate powerful unions while dealing with taxpayers who fume that government employees haven't shared the pain of a recession that has cost more than six million private-sector jobs. Government jobs have traditionally been an island of stability during recessions, and states kept adding workers well after the recession began at the end of 2007. But since August 2008, states have shed about 33,000 jobs, according to data from the federal Bureau of Labor Statistics. Experts say more layoffs are inevitable. Furloughs have already affected hundreds of thousands of workers -- more than 200,000 in California alone.

More than 20 states have considered forcing employees to take unpaid furlough days, according to anecdotal reports as well as data compiled by the National Conference of State Legislatures, which says it is too early to calculate exactly how much these moves save the states. About five million Americans work for state governments, according to federal statistics, from colleges and prisons to public hospitals, parks and all kinds of administrative offices. In some states, labor unions have turned to the courts to try to stop shutdowns.

Rhode Island Judge Refuses to Block Rhode Island Government Shutdown

Rhode Island residents looking to renew their drivers licenses, get help claiming unemployment benefits or even go golfing could face closed doors Friday after a judge cleared the way for Gov. Don Carcieri to shut down most of the state government. Unions representing nearly 13,000 state workers are seeking to stop the shutdown day, the first of a dozen planned by Mr. Carcieri. Superior Court Judge Michael Silverstein on Thursday refused their request to do so, instead ordering both sides into arbitration, a process that could take two months or more. A state Supreme Court justice planned to hear an appeal from the unions Thursday afternoon.

Mr. Carcieri, who didn't immediately comment on Judge Silverstein's ruling, ordered the shutdowns to help close a $68 million shortfall in a state budget hammered by surging unemployment and dwindling state tax revenue. The shutdowns will require all but essential workers to stay home without pay, or about 80% of the state's work force. "We want to stop the shutdowns and go to arbitration," said Brendan Fogarty, president of Local 400, whose union represents employees from the departments of transportation, environmental management and administration. "We don't want our members to not get paid while we wait for the decision."

California The human toll of state budget cuts

Big ol’ honkin’ crocodile tears: Those are what our state legislators have been shedding with regard to passing their smoke-and-mirrors budget. "We’ve had to make the hard decisions," they bemoan with grimly set mouths.

I don’t buy that for a second; it’s simply not true. As education, health and human services are slashed this year because of poor stewardship in Sacramento, the Legislature gives a pass on levying a California oil extraction tax, the only oil-producing state in the nation not to have one.

Streamlining government by consolidating — or eliminating — well-paid regulatory boards and commissions? Nope. Sewing shut corporate loopholes that allow offshore tax breaks? Uh-uh. Steps toward meaningful pension reform in the public sector? Not a chance.

In fact, the Fair Political Practices Commission said in early August that state officials had fattened their lobby-stuffed coffers by more than $60 million through fundraisers in the first half of 2009 — and it’s not even an election year. No, our solons in Sacramento are taking the money and making the tough decisions to balance the budget on the backs of their least powerful constituents, those without lobbies: the young, old and infirm.

Connecticut Connecticut governor to reluctantly allow budget to become law

Connecticut's state budget is to take effect Sunday because Gov. M. Jodi Rell is reluctantly letting it become law without her signature. Rell criticized the budget as calling for more borrowing and vague plans for future spending. But the governor said she would allow it to become law because Connecticut residents were feeling the effects of the budget stalemate.

Connecticut Rep. Stripp votes against state budget"

"This economy has forced residents to trim their budgets, to change the way they live their lives. Their government should face the same reality."

[Stripp] claimed the Democratic-approved budget "is built on unprecedented levels of debt, gimmicks and holes that will require even more taxes in the near future." According to Stripp, the budget passed by the legislature includes $1.5 billion in tax increases, borrowing $2 billion to plug holes in the next two years, emptying the $1.4 billion rainy day account, and counting on $1.5 billion in federal stimulus money. The state’s current budget deficit is estimated to be about $8 billion.

Maryland State budget cuts mean rough road for county

Baltimore County will lose 90 percent of the state aid that pays for highway construction and road maintenance as part of an effort to close an estimated $740 million deficit in this year's Maryland budget. The rest of the county cuts will come from aid to police, the health department and the Community College of Baltimore County. The state Board of Public Works unanimously approved Gov. Martin O'Malley's proposed $450 million in cuts to the state budget Aug. 26. Included are the elimination of 364 state jobs and the imposition of up to 10 furlough days for state employees.

New York Counties Don't Want Budget Burden

The state budget gap is big -- $2.1 billion -- but county executives from across the state are warning legislators not to pass that burden down to the counties. "Should they propose cutting spending, we will stand with them," said Stephen Acquario, executive director of the New York State Association of Counties. "If they propose cost shifting to county property tax payers, we will not and we will fight these proposals."

Conn, Pa Connecticut and Pennsylvania state budgets still in limbo

A program that helps thousands of Connecticut welfare recipients find work has been in limbo for two months. Family resource centers, which provide child care, adult education, and other services, have shut their doors. In Pennsylvania, day-care centers have laid off workers. Some preschool programs are scrapping plans to reopen in September. And tens of thousands of state employees had to wait to be paid for several weeks.

While most states have already passed their budgets, Connecticut and Pennsylvania remain the only two in the nation still at odds over how to balance the books this fiscal year amid plummeting state revenues. Connecticut's revenue flow has dropped by $2 billion from last year while Pennsylvania's came in $3.3 billion less than expected.

Florida Florida economist: $1 billion budget hole next year, $2.3 billion by 2011-12

Florida chief economist Amy Baker is friendly and quick with a smile, but her messages tend to be real downers. So it went Thursday, when Baker told the Legislative Budget Commission that the coming year's budget faces a potential gap of $923 million, and by 2011-12 when federal stimulus dollars dry up, the hole could be as big as $2.3 billion.

Credit a still-weak economy and real estate market, combined with increasing needs in areas like health care and other state-funded services. Baker used terms like "massive wealth destruction" to describe the affect of the recession and plummeting home values on Floridians and the state economy. She gave scary stats like the median price of a home going from $250,000 to $147,000. Oh, and she said to brace for more high unemployment numbers.

Ohio Ohio Roundtable sues state over slots

Gov. Ted Strickland’s bid to install video slot machines at Ohio’s horse-racing tracks has been hit by another legal challenge, with U.S. Sen. George Voinovich, R-Ohio, joining those against the plan. The Ohio Roundtable, a conservative public policy organization based in suburban Cleveland, filed a lawsuit Thursday against the slots plan, asking the Ohio Supreme Court to declare it unconstitutional. The suit challenges Strickland’s plan to install 17,500 slot machines at seven racetracks through an expansion of the Ohio lottery. The plan, estimated to raise $933 million for state coffers through June 2011, was included in a two-year state budget bill passed by the Ohio General Assembly in July.

Michigan No Budget Deal Yet in Lansing

State budget talks continued for another day in Lansing. But there's still no resolution to the $3 billion deficit. Governor Granholm huddled with the Legislature's Republican and Democratic leaders for most of the day. They were joined by some business leaders to help facilitate the negotiations. They shared some ideas on long-term cost savings.

Michigan Status of State Budget

Republican and democratic leaders are meeting at the State Capitol, now in the tenth hour of a marathon negotiating session. They're trying to dig the state out of its 3 billion dollar deficit. It's a story 6 News has been keeping a close eye on. The speaker of the house, the majority leader in the senate and the governor are still talking behind closed doors. They've been negotiating since 9am and they're scheduled to go until 9pm. A lot hinges on these negotiations. As you know, the clock is ticking. We've got just days now to get a budget passed or state government will shut down.

Michigan Michigan groups call for higher taxes to save budget

A coalition of social service, education and labor groups called on state officials Wednesday to raise $2.1 billion more in taxes and end $600 million in tax exemptions to avoid deep cuts in the budget that starts Oct. 1. Michigan faces at least a $2.7 billion budget deficit in the upcoming budget year. It will be able to fill some of its budget shortfall with federal recovery money, but those calling for increases say the state needs to make long-term changes to its tax structure to avoid future deficits.

South Carolina Budget and Control Board cuts 4% from South Carolina state budget

A 4 percent across-the-board cut to South Carolina’s budget could mean more cuts for area school districts. But decisions on what cuts will be made might not trickle down to districts for the next two to three weeks, officials said. Schools, colleges, prisons and other state agencies lost 4 percent of their budgets Thursday as South Carolina’s financial oversight board dealt with lagging tax collections. The five-member Budget and Control Board, meeting in Columbia, agreed to trim $200.5 million from a $5.7 billion budget. That included $85 million from the Department of Education.

Mississippi Mississippi governor orders 2.9% cut in $6 billion budget

Mississippi Gov. Haley Barbour on Thursday ordered budget cuts for some state programs, including all levels of education, because state tax collections were sluggish during the first two months of the fiscal year. Barbour ordered cuts of $171.9 million in a $6 billion budget. That's about 2.9 percent of the overall spending plan. Some programs will remain untouched, while others are being asked to save up to 5 percent.

The governor tells agencies how much money they're losing, but it's up to the agencies' executives to decide which services to shrink or eliminate. Barbour said it's easier for them to do that early in the fiscal year rather than late. "We've got a budget storm on the horizon," Barbour said during a news conference Thursday. "We can't avoid the storm. We know the best thing is to prepare early, act early."

Utah Governor Convenes Budget Cutting Commission

Governor Gary Herbert has organized a commission to take a fresh look at state budget cuts to bridge what could be an $800 million shortfall next year. And unlike his predecessor, Governor Jon Huntsman, he’s not promising to avoid cuts to public education and critical human services. "Nothing should be off the table, we ought to look for ways to be efficient as we possibly can with the taxpayers’ dollar," Herbert says. "That’s why it’s called optimization here of government services."

Idaho Choices loom amid bad budget news for Idaho

Idaho is facing a $151.4 million tax revenue shortfall in the current budget year, according to a new state forecast, and state leaders will have to decide whether to further slash the state budget or dip into rainy-day funds that now total $274.3 million.

Lawmakers and Gov. Butch Otter have been reluctant to spend much of the state’s reserves, which stood at $391 million before the Legislature convened this year. But they spent nearly a third this year, while also imposing deep cuts in the state budget, including the first-ever cut in state funding for public schools and a 5 percent cut in personnel costs statewide, for all agencies. That’s led to furloughs, layoffs and more; for example, this Friday, the legislative services offices is closed due to staff-wide furloughs.

"We have been here before," Otter said today, in response to the gloomy revenue news. "We have the experience, the tools and the commitment needed to address this situation while maintaining necessary public services. We are fortunate to be far better off than most other states [..]"

California Social service agencies hurt by massive state budget cuts

The moment Gov. Arnold Schwarzenegger signed the new California budget, billions of dollars across the state evaporated from social programs designed to protect society’s most vulnerable — the elderly, the homeless, the disabled. "The whole safety net is thinner," said Avi Rose, director of Jewish Family and Children’s Services of the East Bay. Much of the $16.1 billion California budget reductions were drawn from social programs, such as in-home health care for the elderly or disabled, mental health services, employment services, community clinics and child welfare and foster care programs. The $16.1 billion cuts — combined with $14.9 billion cuts enacted in February, local government funds, tax revenues and federal stimulus dollars — will help close a $60 billion gap in a $198 billion budget.

Arizona Arizona report cites continued state revenue drop

Arizona's tax revenues continue to drop and the state's economy apparently has not has reached bottom yet, according to a new state report released Monday. The Joint Legislative Budget Committee staff's report showed state tax collections of $573 million in July. That's 10 percent below July 2008 revenue and $33 million below this year's forecast for the month. Of the two biggest revenue sources, sales tax collections for the month were down 18 percent from a year earlier and individual income tax collections were down 11 percent.[..]

Despite a constitutional requirement for a balanced budget, the state on June 30 finished the last fiscal year with a shortfall approaching $500 million. The treasurer has had to borrow hundreds of millions of dollars on a daily basis from a variety of state accounts to cover state operating expenses

New Hampshire Republicans call for state special session

Republican legislative leaders called upon Gov. John Lynch to convene a special session to cut spending in a state budget embroiled in a $110 million court dispute and faced with lagging revenues over the past two months. Senate Republican Leader Peter Bragdon, of Milford, and House Republican Leader Sherman Packard, of Londonderry, asked Lynch to release state agency head work papers from last fall that assumed a 3 percent cut in state spending over the next two years.

"We need to come back; we need to make the cuts which we are asking for,'' Packard told reporters. "We are asking for the governor to step up, call us back into special session so we can make the cuts necessary to make.'' The Supreme Court will hear oral arguments Oct. 15 on a lower court ruling that judged as illegal the state budget making use of $110 million in surplus with the Joint Underwriting Association. Bragdon said Lynch's optimism that the state will win the lawsuit doesn't settle the budget dilemma especially with state taxes and fees off forecast by 15 percent or $17.6 million last month.

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[Marion Shaw]

I really don't know much about international finance or even regional finance.
I do know if I personally spend more than I can pay for, eventually I will be
ruined with the accumulation of outrageously high interest rates. However, I
lived in South Korea in 1996 where the public was spending money like a drunken
sailor including myself. Then they almost tanked in 1997. They made a remarkable
recovery and seem to be coming back faster than most countries in this present
crisis. What did they do to save themselves in 1997? One thing I believe that
helped them was the donation of thousands of citizens and housewives who lined
up and gave the government millions of dollars worth of gold jewelry. I can't
imagine Americans doing that but maybe we ought to give it some thought.

[HSpencer]

Marion Shaw. I am not being sarcastic towards your comment, but if you will recall, we do line up every April 15, and give the government oxycontrillions of our hard earned dollars. Here, in the US, the government itself is spending money like a drunken sailor. I fully understand, and knew about South Korea and the financial problem you speak of. By now the US government is spending more than can be repaid by grandchildren of ours out to 2090, if the world lasts that long. On another blog, I recommended a book on Amazon.com, for Congressmen: The title was "Debt for Dummies" "How to GET OUT and STAY OUT of debt". We are a wonderful big country, but we can't:

Buy everyone a trip to the doctor's office.
Buy everybody's old used car.
Buy everyone's overspent and outrageous mortgage.
Buy everyone who walks in the door, Housing, Food and Emergency Room visits, send their kids to our schools for free.
Bail out crooked and stupidly managed insurance companies, auto companies, and banks.
Fight wars whenever someone decides it might be a good thing, and buy more and more Stealth Bombers and Canteen Cups.
Send everyone's kid to college whether they want to go or not.
Go to Mars, Venus, Planet X, Y and Z, and build and fly Space Stations and Gazillon dollar telescopes and stuff.
Hire more and more government employees, so we will have people available to hand out the money, and interview even more potential government employees.

The list goes on---(this is a good place to stop).