Businesses responded early in the recession, cutting labor and other expenses, preserving their cash, and taking other steps to gird themselves for hard times. States failed to respond when they should have to the recession. Conversely, with the Federal government on a spending spree that bailed out States with money for medicaid, unemployment benefits, and money to retain workers, States borrowed more and drew down reserves and failed to make hard budget decisions and to confront unions.
The public sector recovery lags behind the private sector, so while the economy is on the rebound, public sector fiscal woes are reaching the breaking point. It was written in a Feb. 2011 article from the Center on Budget and Policy Priorities, "Unemployment remains above 9 percent, and many economists expect it to remain at high levels throughout 2011 and beyond. Continued sluggish job growth will keep state income tax receipts at low levels and increase demand for Medicaid and other essential services that states provide. High unemployment and economic uncertainty, combined with households’ diminished wealth due to fallen property values, will continue to depress consumption; thus, sales tax receipts also will remain low. These factors suggest that state budget gaps will continue to be significantly larger than in the last recession, and last longer."
Projected shortfalls for 2012 alone represent nearly a 20% gap. And this estimate was prepared BEFORE the GOP recently announced proposed cuts of nearly 20% in non-defense Federal spending which will no-doubt impact State's funding!! The States have blown through their reserves already and their costs for services and safety net programs have gone up due to the recession and high unemployment! So the trillion dollar question is HOW ARE STATES GOING TO MAKE UP THE DIFFERENCE?!While I don't have data, it is a logical assumption that fiscal problems at the Federal and State level are effecting County, City, Town, and Village operations AS WELL AS schools across the Country as well. As the States make their cuts we can certainly expect it to effect local services and education funding. And with record snow falls this year you know the clean-up costs are way above what was originally budgeted when 2011 budgets were done. HOW IS YOUR STATE, COUNTY, CITY, TOWN, VILLAGE, AND SCHOOL DISTRICT GOING TO MAKE UP THE DIFFERENCE?!
It's not quite budget season for States and municipalities. July is when most of State budgets take effect for the next fiscal year. So States are only beginning to gather their data in order to work up their budgets. But you can be sure there will be some desperate moves when those planning meetings come round.
Ordinarily government and school districts, with their tax powers, just raise revenue (taxes) to keep on spending. While they will be forced to look for additional revenue, there's no way Government can or will close the gap with taxes. Neither the economy or the politics will tolerate that approach. Government has to focus on the spending side! So it's a given that nearly every State program, every operating line item, and every government funded job will be under scrutiny. IT'S ABOUT TIME!
Government has no choice - it has to scrutinize and cut anything and everything! And this has to include the obligations they've got to pensions and prior labor contracts, even if it takes changes to the laws to allow States to file bankruptcy. Excesses in municipal and government related retirement compensation and benefits need to be adjusted to fairly share the pain of the past excesses in spending! IT'S ABOUT TIME!
The cuts in spending that need to be enacted at every level of government will be like a giant flush sending waste down the drain. If America plays this recession right we may just get find ourselves with a far more efficient Government that will serve us better for years to come.
As we enter the next wave of prosperity and the tax revenues pick up again Government can start to do something that households and businesses have been doing for the last 12-24 months - using savings to start paying down our debt! Wow, imagine that. IT'S ABOUT TIME!
