The Day Of Reckoning For State Governments
Posted By thestatedtruth.com on November 16, 2010
It looks like the day of reckoning is close at hand for state governments. Illinois faces a deficit for the fiscal year beginning July 1, 2011, that could reach $15 billion—more than half the state’s general-fund budget. California faces a deficit next year of $25.4 billion, twice the size of previous forecasts and California Gov. Arnold Schwarzenegger last week called for legislators to meet Dec. 6 in a special session to make midyear budget cuts.
This From The Wall Street Journal:
From Sacramento to Austin to Albany, the day of fiscal reckoning is here. At one point this spring, financial markets were demanding more to insure investors against defaults by Illinois, New Jersey, New York and Michigan than to insure the debt of Ireland and Portugal, the flailing economies of Europe.
Federal aid cushioned states from some of the drop in revenues during the recession, but that’s running out. With all statehouses unable to borrow as readily as Washington and nearly all constitutionally required to balance their budgets, they can’t ignore gaps between revenue and spending.
On Monday, Pennsylvania’s house of representatives passed a bill, already approved by the state senate, that raises the retirement age for new state workers and gives workers a choice between lower pension benefits and higher contributions.
After learning that California faces a deficit next year of $25.4 billion, twice the size of previous forecasts, California Gov. Arnold Schwarzenegger last week called for legislators to meet Dec. 6 in a special session to make midyear budget cuts.
State governments—battered by the downturn and generous pension promises to their employees—have cut spending and raised taxes, while Washington has been spending more to prop up the sagging economy and cutting taxes.
In other states, notably Illinois and California, the political system has done little more than lurch to the end of the fiscal year. California voters took a step toward alleviating gridlock, approving a referendum that reduces the legislative votes needed to approve a budget to a simple majority, from the current two-thirds. It will still take two-thirds to raise taxes or fees, however.
Illinois is a case study in the cost of delay. With revenue falling and payments due to state-employee pension funds, Illinois faces a deficit for the fiscal year beginning July 1, 2011, that could reach $15 billion—more than half the state’s general-fund budget. Because the state hasn’t made any pension payments for four months, the pension funds have been selling assets.
Comments