If there’s one thing politicians don’t like, it’s tough decisions. Well, tough decisions are what many politicians around the country are facing right now, whether they like it or not. With the recession hammering tax revenues, many states are struggling with massive budget shortfalls that could jeopardize spending on social programs, infrastructure, education, prisons, and other programs.
By far, the hardest hit state is California. Dan Walters at MercuryNews.com opines regarding California budget crisis:
Officially, the state has a $19.9 billion deficit for the remaining five months of this fiscal year and all of the next, but there’s every reason to believe it will be worse, given the sorry history of budget forecasts. In just two months, Controller John Chiang says, the state will face the year’s first cash crunch — a lack of money to pay its outstanding bills — unless Schwarzenegger and legislators act quickly.
The state will receive a surge of income taxes in April, but much of that revenue will be quickly diverted into repayment of short-term loans. The state could be cash-poor again beginning July 1 and unable to float more short-term “revenue anticipation notes” unless it has a budget in place. When that happened last year, the state reverted to paying bills with IOUs.
Meanwhile, back at the Capitol, Democrats are staging hearings to publicize the effects of the deep cuts in social welfare and health care that Schwarzenegger proposes even if the state were, by some miracle, to receive all the money from the feds that the governor evidently believes we are owed. But if the federal bucks aren’t forthcoming, as now appears evident, Schwarzenegger proposes even deeper cuts in those programs, such as elimination of all welfare grants and the program that provides state-paid home helpers to the elderly and infirm.
New Jersey is facing a difficult budget situation as well:
David J. Rosen, the Grim Reaper of the New Jersey state government’s fiscal nightmare, appeared before the Senate Budget and Appropriations Committee Thursday and told them the deficit legislators and the governor must overcome when crafting the 2010-11 budget by June 30 could climb as high as $11 billion.
Rosen, the budget and finance officer for the non-partisan state Office of Legislative Services, also warned the legislators that even if tax revenue should grow at a rate of 4 percent or 5 percent annually, it will take until 2014 for the government to recover to where it was financially in 2008.
Rosen said the deficit Gov. Chris Christie is facing as he creates his first budget may range from $8 billion to as high at $11 billion “depending on who is looking at the problem.
Illinois is facing such massive budget problems that some are predicting imminent bankruptcy for state:
The question is: what can Illinois do about its near-bankrupt status?
Answer: not much.
Federal bankruptcy protection doesn’t apply to states, so there’s no way for Illinois to hide from its creditors. And none of Illinois politicians are willing to make the tough choices needed to close the budget gap, like raising taxes or cutting spending, Crain’s notes.
Many foresee a governmental collapse in which vendors will stop bidding on contracts, investors will stop buying bonds and employees will be paid with IOUs, similar to what California has done.
“I don’t see any light at the end of the tunnel,” Dan Strick, CEO of SouthStar Services, a Chicago Heights non-profit that helps people with developmental disabilities told Crain’s. “It seems to be getting worse and worse, and the delays longer and longer.”
Indeed, Illinois is not taking in cash, its liquid assets have dipped below $1 million at times, Comptroller Dan Hynes said, and the state is supposed to pay $5.4 billion into its pension fund next year and $10 billion the year after that. And that’s just the beginning.
Out west, in Nevada, state officials are considering cutting 10% from the state’s education budget. That might not seem like that much, but it apparently will be disastrous for school system employees:
Clark County Schools Superintendent Walt Rulffes said a 10 percent cut in funding from the state equates to $28 million for the current fiscal year and $85 million for the 2011 fiscal year. When declines in the district’s local funding are included, Rulffes the loss of funding for schools will be “profound.”
The options for the district are massive layoffs or “smaller sacrifices by all,” Rulffes said. He is asking the leaders of the unions representing teachers, administrators and support employees to survey their members and look for possible concessions, including the possibility of furloughs….
Dan Burns, spokesman for Nevada’s Governor Gibbon, made the following prescient comment:
“Grab a hold of the notion of shrinking government because that’s our destiny,” Burns said.
I couldn’t agree more. When household income shrinks, families have to tighten the belt. Government needs to do the same thing. Politicians grew to expect that every year would be like the housing boom years, when government coffers were overflowing. Now that the economy is shrinking and clearing out the excesses of the last boom, government needs to do the same.
-CH
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