Tuesday, November 24, 2009

Scary State Budget Deficits:-2

The States have been too generous in granting raises to public employees when the times were crazy. But they were trying to avoid strikes by public employees and in order to placate them, they kept on adding expenditure. At flush times it would have been great to share the wealth, but times have now changed for the worst, and this cannot work any longer. The cuts have become very deep and painful and it keeps on coming.

This downturn is so bad that the states keep on revising downward their revenues and still the most conservative estimates are way off the mark for most states. You know that the states don’t have the luxury to print money and keep on piling on debt. Most of the states are under mandatory law to balance their budget every year unlike the Federal Government (although as far as I can recall, we did have a law to balance the budget but that is another story).

Now how to fix all the mess that the states are in right now. Property prices are falling making the taxes on property less predictable, hunger is increasing, and there is pressure on Medicaid and food stamps. Homelessness is growing and people are declaring bankruptcy in increasing numbers, foreclosures are rising despite all the government efforts. So what to do now. Well the states government doesn’t have much in their arsenal to wither this downturn except to cut and reduce spending and tax people.

Cutting will have to be done in every sector except emergency services, the raises of the government employees will have to be stopped and more furlough will have to be implemented. Aid to schools will have to be curtailed and taxes will have to be raised across the board.

I mean that property taxes will have to be reconsidered at least in California where the demand for services is the greatest but the revenues streams is the shortest right now.

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