Facing Deficits, States Get Out Sharper Knives

[Idealism]

Source: New York Times

LOS ANGELES — Two short months ago lawmakers in California struggled to close a $15 billion hole in the state budget. It was among the biggest deficits in state history. Now the state faces an additional $11 billion shortfall and may be unable to pay its bills this spring.

The astonishing decline in revenues is without modern precedent here, but California is hardly alone. A majority of states — many with budgets already full of deep cuts and dependent on raiding rainy-day funds or tax increases — are scrambling to find ways to get through the rest of the year without hacking apart vital services or raising taxes.

Some governors, including Arnold Schwarzenegger in California and David A. Paterson in New York, have called special legislative sessions to deal with the crisis.

Others are demanding hiring freezes and across-the-board cuts. A few states are finding their unemployment insurance funds running dry, just as the ranks of out-of-work residents spike.


Read more: http://www.nytimes.com/2008/11/17/us/17fiscal.html?_r=1&hp&oref=slogin

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Expect this to only get worse, as state budgets will fall more into the red due to less taxes being collected. Education will be the hardest hit

[DJ13]

1. One thing I dont understand

Why is there a shortfall?

I know its "because of the housing crisis", but arent banks responsible for paying the property taxes on the property they've foreclosed on?

[Doctor Cynic]

2. If the property values are crashing, then so do property tax revenues.

[DJ13]

3. Well then, why did my property tax here in Ca. go up this year?

[Muttocracy]

6. did the tax rate per assessed value go up, or did your assessment go up? nt

[aggiesal]

10. If you are being tax higher than the value of your home, ...

you can petition your county to reassess your property and have your
property taxes lowered.

[Idealism]

5. Not just the loss of property revenues, but the major swelling of unemployment insurance payments

[Pharlo]

14. In addition to the housing crisis,

There are federal unfunded mandates, the high cost of fuel for the majority of this year which would affect any public service (including state) which uses gas or diesel and any building needing to be heated, cost of rising electricity, assistance to cash strapped localities, attempts to compensate for federal 'social' budget cuts, an increasing strain on unemployment, natural disasters which did not receive federal assistance - or partial federal assistance....... it all adds up, and not all of it can be accurately forecasted for budgeting purposes. While 'unforeseen contingencies' have a budgetary allocation, the states were unprepared for what they're encountering right now.

[customerserviceguy]

15. Many states depend heavily on income and sales taxes

when folks get laid off or have their hours cut back, there's less income to tax. Also, in such an environment, everybody pulls back on taxable spending.

Another angle on the housing crisis, most places will let you be in arrears on real estate taxes a few years before foreclosure proceedings are started. A lender who takes back a property might just hold off on paying them until they can finance it out of cash from a sale. It's expensive to borrow that way, because penalties often tack on more than the interest charged, but when you have a cash flow crisis, it's the only thing you can do.

[bluestateguy]

4. Looks like Texas was kept afloat by the (formerly) high oil prices

They've got one mean legislature there. If they have to cut the budget, it's always the most poor and vulnerable that pay the price.

[bluesmail]

7. RECALL VOTE

What they did to Grey Davis was criminal.

[DeltaLitProf]

8. Many states have hard balanced-budget laws

Here in Mississippi, there is a law against the state budget ever going into the red. So it is not possible for the state to go into temporary debt to create economic stimulus. So the places where economic stimulus could be most readily applied, road-building, education spending, etc are the most likely to be cut. Such is the continuing legacy of Republican economic policy.

[qwlauren35]

9. Question: Education spending stimulates the Economy?

I understand road building, but not education. Unless you mean repairing and rebuilding schools.

[DeltaLitProf]

11. All kinds of ways

The more people employed at educational institutions, the more money they spend in their communities, the more houses are bought, the more property values increase, the more tax revenue is generated, the more cars are bought . . .

The more scholarships are given, the more students stay in your state, the more they spend on food, clothing, books, the more sales tax is paid . . .

Funding education is a seldom spoken about, but powerful and nonpolluting way to develop a local economy. Look how many city and county governments are investing money into community colleges. They aren't just doing it to be altruistic.

[customerserviceguy]

16. It depends

when government funds education that leads to making people ready for jobs that the market is offering (such as nursing, for an example), then it's a worthwhile investment that pays society back. But just handing out loans and grants to people to take courses of study that have no reasonable job prospects is just shoveling money down a rathole.

The state of Washington paid for me to get a network administrator's associates degree back in the early part of this decade. I was never able to use it other than by running my own part-time side business. Even education in technical subjects doesn't always pay society back.

[Hannah Bell]

12. Teachers & school personnel having jobs stimulates the economy.

So does buying textbooks & supplies, utilities payments, school food purchases, etc.

[OneBlueSky]

13. here in New York, my local school district has been informed that . . .

their state allocation for next year is being reduced by $2.5 million . . . that money has to be made up somewhere, or teachers and staff have to be laid off . . . the only place the district can get more money is from the taxpayers who own property, all of whom have already received word that town taxes will be rising by almost 7% . . .

while education advocates scream that there is no way to cut this level of services, homeowners are screaming equally loudly that there's no way they can absorb tax increases of this magnitude . . . something's gotta give, but I don't know what it will be . . .

[aggiesal]

18. Expect more of this ...

http://www.detnews.com/apps/pbcs.dll/article?AID=/20081117/METRO/811170333

[Idealism]

17. The biggest point missed here is that Education spending undeniably promotes economic growth

Yes, short-term growth was talked about (textbooks, teachers pay, et all) but what was missed is the fact that High school graduates make 80% more through their lives than drop outs. Also, College degree workers will make over $1 million dollars more in their lifetimes, on average, than a High school educated or equivalent worker. What does this mean to the government? Extra tax revenue for 35+ years that one will work from finishing their degree till retirement. This is why free public education through college will pay for itself many times over. Think of the differances in taxes someone pays who does construction and makes $55,000 a year compared to an architect who makes $150,000 in the same period. Education spending in any form promoted long term sustainable economic growth, period.