US states face budget meltdowns

BBC ^ | July 2, 2009 | Steve Schifferes

[upchuck]

It is the latest sign of the fiscal crisis that is spreading across the nation as the recession has had a dramatic effect on state spending.

The 50 US states play a much more important role in the US system than local authorities do in a European context. Together they make up about one-third of all public spending, or 10% of US GDP.

Most spending on schools, roads and welfare support is made at the state level.

And the states also have an important constraint that the Federal government does not - they have nearly all passed laws in the past 20 years requiring them to have a balanced budget, and forbidding them to borrow money to pay for current spending.

This has hit them very hard as the US recession starts to bite.

States rely on sales taxes and property taxes at the local level to fund much of their spending.

These revenues have plunged as the economy has gone into freefall.

At the same time, they have faced higher bills to pay for the casualties of the recession.

According to the Center for Budget and Policy Priorities (CBPP), a Washington think tank, 48 of the 50 states are facing budget deficits this year, with a total deficit of $166bn, or 24% of their budgets. And it projects an aggregate deficit of $311bn by 2011.

With the new fiscal year for most states beginning on 1 July, their state legislatures have been under pressure to agree and package of higher taxes and fees, and cuts in services to balance their budgets.

Seven states have failed to reach agreement on a new budget - including many of the big industrial states such as Illinois, Ohio, and Pennsylvania, as well as Arizona, also hard-hit by the sub-prime crisis.

[upchuck]

Together they [the 50 states] make up about one-third of all public spending, or 10% of US GDP.

What a shame. If our country was being run according to the constitution, the states would make up at least three-quarters of public spending.

[mosaicwolf]

I grew up in the 1940s. I know that was a long time ago in a galaxy far, far, away, but I recall my Mother saying something like “We all have to tighten our belts.” Maybe with the attire these days (men's pants hanging down around their Axx) no one knows the meaning of “tighten your belts”.

[Wooly]

THe problem in the states that have budget problems is that the money has run out and the politicians still owe the special interests that got them elected, but they are still trying to pay them off. So they are cutting other programs to try and get the money.

[EQAndyBuzz]

People are morons. They are lied to by the same politicians year after year and they continue to believe them with the hope that one day they will be rewarded for that vote.

Toss in a charismatic figure and a complicit media and you get people like Hitler, Stalin, Jones, Chavez, Castro....Obama.

[upchuck]

Margaret Thatcher (paraphrase), “The problem with socialism is that you eventually run out of other people’s money.”

Bingo! Kalifornicia is a perfect example of this.

[wilco200]

These stories are reported as if it’s a bad thing.

I cheer every time I hear about the govt. shutting off the lights.

[upchuck]

I grew up in the 50s (graduated HS in 1962). And I can remember my Mom saying that. And we did it.

I work with a lot of low income people. To them everything is a necessity. Can’t give up the cell phone, oh no! Can’t give up the cable TV, oh no! Can’t give up their upside down car lease, oh no!

These folks haven’t got a clue about managing their money or their life. They lack the intelligence to make good, solid decisions that will have good outcomes.

Thank you Imperial Government school system.

[Clara Lou]

No, I can't give up anything! I deserve all of my creature comforts. And I deserve them now. And the government should provide them for me if I can't afford them.

[GeronL]

And the states also have an important constraint that the Federal government does not - they have nearly all passed laws in the past 20 years requiring them to have a balanced budget, and forbidding them to borrow money to pay for current spending. This has hit them very hard as the US recession starts to bite

Its the spending that hits us hard, not the constraints on it.

[LonePalm]

Of course, it never occurs to the legislators to only give money to people that EARN it.

Garde la Foi, mes amis! Nous nous sommes les sauveurs de la République! Maintenant et Toujours!
(Keep the Faith, my friends! We are the saviors of the Republic! Now and Forever!)
LonePalm, le Républicain du verre cassé (The Broken Glass Republican)

[upchuck]

Amen!

It is very irritating and frustrating to ask someone, “Are you currently employed?” and have them respond, “I get a government check.” Of course they are really saying, “I don’t have to work, the government shares some of your tax dollars with me.” Pisses me off!

[Oatka]

At what point do the Chinese, et al, who buy our Treasury Bonds and keep reading articles like this say “Oh Oh, time to hit the silk.” Apparently they have been doing this on the QT for a while but I wonder which country will be the first to yell “Fire!” in the crowded theater?