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Tuesday, August 05, 2008 9:32 PM


Eight States In Deep Fiscal Trouble


Many states are in deep fiscal trouble. One state not even on the list of troubled states appears to be acting in advance. Please consider Washington Governor Gregoire orders hiring freeze, cutbacks.

Gov. Chris Gregoire did Monday what families and businesses have been doing for months: She ordered cuts in travel and buying gasoline, a hiring freeze and a lid on major purchases for most state agencies.

The effort is expected to save $90 million, making up for an unexpected $60 million drop in revenue in June. The lost income came from a slowdown in the housing market and lower business taxes than expected.

"I am asking each of you to step up your efforts to increase savings. I ask that you be creative and take action now," Gregoire said in a memo to state employees. "The high price of energy is hurting our businesses and our families. Anything we can do to reduce fuel consumption will ease the burden on our budget and on taxpayers."

The measures suggest the governor might be looking ahead to a serious deficit in the next budget. Gregoire and her staff have disputed the number, but some budget minders say the gap could reach $2.7 billion.

Republican gubernatorial challenger Dino Rossi called the reductions too little and too late to make up for earlier spending.

"I'm glad that Governor Gregoire has started to recognize the budget crisis she's created. She had to know that by increasing spending 33 percent in her first term she was heading the state toward a budget deficit," Rossi said.

He said his restrictions would be even stricter.

"In addition to a hiring freeze, we should also freeze salary increases for politically appointed state employees. Further, Governor Gregoire should suspend salary negotiations with state employee groups over pay increases until we know the full extent of our deficit next year," Rossi said.

Upcoming Cuts

  • A reduction in gas consumption by 5 percent compared with last year
  • A freeze on hiring to fill new staff vacancies
  • A freeze on nonemergency out-of-state travel
  • No new purchases of discretionary equipment
  • No new nonemergency services contracts

29 Troubled States

The list of states in trouble is 29 on the way to 50. The Center on Budget and Policy Priorities is reporting 29 States Faced Total Budget Shortfall Of At Least $48 Billion In 2009.

Washington, California, and New York have all recently acted. Every other state will eventually follow to varying degrees.

The worst states as a percentage of budget gaps vs. general funds are in order: California (21.3%), Arizona (17.8%), Nevada (13.5%), Rhode Island (12.6%), Florida (11.0%), New York (9.1%), New Jersey (7.6-10.6%), and Alabama (9.2%).

Those eight states are already in deep trouble. Another 21 are in less trouble. Interestingly, Washington is not even on the list but is is acting anyway.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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