Wikinvest Wire

State budgets still spiraling out of control

Monday, November 16, 2009

A report from the Pew Center on the States shows that other parts of the country are now catching "California disease" in which the state budget spirals out of control, ends made to meet last fiscal year only with some newly printed/borrowed money from Washington D.C.
IMAGE The report begins by noting that California is in a league of its own but, based on the data in the table above, Arizona doesn't appear to be too far behind. Oregon's not doing so hot either.

In the map to the right it's clear to see that problems are worst in the four housing bubble states of California, Arizona, Nevada, and Florida along with the rust belt states of Wisconsin, Michigan, and Illinois (is Wisconsin considered part of the rust belt?) and then Oregon, New Jersey, and Rhode Island, all of which have unique difficulties.

Omitted from the table above (for space considerations) is the fact that all but the bottom three states require a "supermajority" to raise taxes and pass a budget, something that makes addressing lost revenue due to high unemployment and foreclosure rates quite difficult. It's much easier to just wait for money from the nation's capital, something that we're likely to see again in 2010 to the tune of perhaps hundreds of billions of dollars.

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5 comments:

Mr.Kowalski said...

Love your blog; I'm following the Muni Catastrophe as well on my blog. It's a subject that few really know about:

http://themeanoldinvestor.blogspot.com/2009/11/problem-with-muni-bonds.html

Ted S. said...

This is a good example of how -- as difficult as it might be to endure --- the U.S. would probably be much better off with some sort of a catastrophic collapse so dysfunctional systems like these can be started with a clean slate. Just about every country around the world has had a fresh start in the last 50 or 60 years except for us and the changes that are needed in place like California are not going to come at the ballot box.

Mr.Kowalski said...

I'm not convinced another bailout totalling hundreds of billions will get thru an angry Congress this time around. There is talk of a "jobs package" in the neighborhood of $300 billion, but it's supposedly going to be about jobs specifically, not helping municipalities and states.

Tim said...

A report last week said that, unless Washington sends another couple hundred billion dollars to the states for the next fiscal year, the states will be forced to lay off around 900,000 public workers.

So a state bailout is a jobs program :)

Anonymous said...

Yeah but the bailout is a short term fix. What will they do the NEXT year? Another $1Trillion added to the budget.

The dollar is as good as dead so why not, huh?

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