Best of the Week
Most Popular
1.The Trump Reset, US Empire's Coming Economic, Cyber and Military War With China (2/2) - Nadeem_Walayat
2.Now Is the Time to Buy Gold - 5th Jan 17 - John Grandits
3.CIA Planning Rogue President Donald Trump Assassination? Elites "Manchurian Candidate" Plan B - Nadeem_Walayat
4.The Trump Reset - Regime Change, Russia the Over Hyped Fake News SuperPower (Part1) - Nadeem_Walayat
5.Most Popular Financial Markets Analysis of 2016 - Stock Market Crash Postponed Again - Nadeem_Walayat
6.No UK House Prices Brexit Crash 2016 Despite London Weakness, Forecast 2017 - Nadeem_Walayat
7.President Trump Understands the NSA, CIA... LIE, America's Intelligence Agencies Crime Syndicate! -Nadeem_Walayat
8.President Donald Trump's 2017 New Year Message, BBC Fake News, Was 2016 a Dream? - Nadeem_Walayat
9.Major Stocks Bear Market Still Looms - Zeal_LLC
10.Biased 2017 Forecasts - Debt, Housing and Stock Market (1/2) - James_Quinn
Last 7 days
Stock Market Trading Patience Pays Off with CHK Using Momentum Reversals - 19th Jan 17
Gold - How to "Buy Low and Sell High" Like a Pro - 19th Jan 17
State of the Global Stock, Financial and Commodity Markets Report 2017 - 19th Jan 17
The Hunt for Russia's Next Enemy - 18th Jan 17
Returning Gold Bulls - 18th Jan 17
Biotech Breakthrough Could Create A $11.4 Trillion Opportunity - 18th Jan 17
Bitcoin and Gold - Outlook, Volatility and Safe Haven Diversification - 17th Jan 17
Stock Market Uptrend on Borrowed Time - 17th Jan 17
The One Stock to Retire On - 17th Jan 17
Trump anti-Communist Counter Revolution - 17th Jan 17
US Stock Market Update as the Trump Inauguration Approaches - 17th Jan 17
The American Crisis - Common Sense 2017 - 17th Jan 17
Obama Leaves, Hope Arrives, Will Stupid Stay? - 17th Jan 17
Damage Inflicted by Precious Metals Manipulation Is in the “Multi Billions” - Keith Neumeyer - 17th Jan 17
Gold Price Forecast 2017 Update - Video - 17th Jan 17
The Story of the U.S. Regime Change Plan in the Philippines - 16th Jan 17
Gold Price 2017 Trending Towards $1375 as Forecast - 16th Jan 17
'Deep State' CIA Director States We are Not NAZI's, Warns Trump Does Not Understand Russian Threat - 15th Jan 17
UK House Prices Forecast 2017 - Crash or Bull Market? - Video - 15th Jan 17
SPX Stocks Bull Market Update - 14th Jan 17
President Trump vs the Deep State that Hides in Plain Sight - 14th Jan 17
The Impact of Sir Alex Ferguson's Retirement on Man United's Share Price - 14th Jan 17
What Can Stock Market Tell You About Politics? - 13th Jan 17
Big Gold Buying Coming 2017 - 13th Jan 17
A Bullish Case for Gold 2017 - 13th Jan 17
Will Stocks Bull Market Continue to Charge or is it Time to Sell the News - 13th Jan 17
Gold and Silver Off To Shining Start to 2017 - 13th Jan 17
Gold’s Fundamental Outlook for 2017 - 13th Jan 17
Is trading stocks and shares just as luck-based as roulette? - 13th Jan 17
Trump CIA Like Nazi Germany - Fake MI6 Intelligence leaked to Fake News Mainstream Media - 13th Jan 17
USD in Decline. SPX and TNX May Follow - 12th Jan 17
CIA War On Trump - Leaks Fake MI6 Intelligence to Fake News Broadcast Media - 12th Jan 17

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

State of Global Markets 2017 - Report

U.S. States Face Tax Shortfalls, Frugality To Hit Budgets

Economics / US Economy Oct 20, 2008 - 07:13 AM GMT

By: Mike_Shedlock

Economics The Los Angeles Times is reporting States face new budget shortfalls .
The moribund economy is drying up tax revenues more dramatically than expected, forcing 22 states, including California, to confront growing budget gaps. Some states have already eliminated jobs and services -- and more cuts are likely.


The new shortfalls -- totaling at least $11.2 billion -- come just months after numerous states enacted belt-tightening measures while writing their yearly budgets. Officials also adjusted their revenue projections downward to account for the slowing economy. But in many cases, the actual revenue for the first quarter of the fiscal year, which began July 1, has proven to be even lower.

"States have been confronted with bad economic circumstances in the past, but never so many states, all at once," said William T. Pound, executive director of the National Conference of State Legislatures.

The revenue pools are shrinking for a number of reasons: Rising layoffs are cutting into payroll taxes. The credit crisis and housing slump are affecting taxes levied on real estate deals. Sales taxes are shrinking as shoppers worried about the economy stay home.

Every state in the union but Vermont legally requires a balanced budget. So state governments have begun cutting.

In Utah, Gov. Jon Huntsman Jr. called the Legislature back for a special session last month to slash $270 million with an across-the-board 3% budget cut. Virginia Gov. Tim Kaine this month disclosed a sudden $900-million budget gap and announced 500 layoffs, the suspension of 2% raises for state workers and a hiring freeze. Georgia, faced with a $2-billion shortfall, is contemplating cuts of up to 10% at state agencies. Lawmakers are also discussing eliminating funding for the state's Music Hall of Fame in Macon. When legislatures convene in January, they will have to consider even harsher reductions, warned Donald J. Boyd, a senior fellow at the Rockefeller Institute of Government in New York, who tracks state budgets.

"What states have done so far -- still generally mild -- pales in comparison to what they will do," he said.

Some of the most dire problems are emerging in states such as California and Florida, where the housing collapse has been the most pronounced.

California lawmakers, who faced a $15.2-billion deficit going into the fiscal year, argued over the budget for months. In the final draft, state services took a big hit: Medi-Cal was temporarily cut by 10%, and the education budget was set at $3 billion less than last year.

The bad news continues to mount. Last month, the state's revenue fell about $1 billion short of projections. Gov. Arnold Schwarzenegger and legislative leaders have been meeting weekly to discuss the problem and are considering calling lawmakers to a special session. In Florida, lawmakers faced a similar challenge as they wrote their yearly budget. The plan they devised was nearly $6 billion smaller than the year before. It resulted in 200 net job losses, tuition increases, cuts to nursing homes and the shuttering of 13 driver licensing offices.

The reversal of fortunes has been dizzying for states such as Arizona. Only two years ago, the state was sitting on a $1.5-billion surplus, but the housing collapse sent the economy into a tailspin. When Gov. Janet Napolitano signed the budget this summer, it was already tightened to close a $1-billion deficit. The state drained its reserve funds, took $18 million that was to be used for maintenance at small airports and instituted a hiring freeze.

But the financial situation has worsened in the last couple of months, and Arizona faces an additional deficit of as much as $800 million.

Shortfall In Oregon

The Portland Business Journal is reporting Oregon Faces $2 Billion Shortfall .

Governor says he'll consider a 10 percent cut for state agencies.

Consensus estimates place the 2009-2011 biennium budget shortfall at $2 billion, or 13.3 percent less than the current budget. To put that in perspective, the shortfall that led to five special sessions in 2001 resulted from a $710 million shortfall.

The crisis couldn't come at a worse time for contractors who rely on state bids. In light of the home construction slump, many contractors must now grapple with new competitors for state contracts, said Larry Thompson, Oregon manager for Bellevue, Wash.-based Tri-State Construction Inc.

“There's a big shortage of work in our industry,” he said. “There are a lot of people who were doing subdivision and housing market work who'd never done public sector work before. We used to go up against five to 10 bidders, and now we're finding 30 bidders for any one project.”

Increased competition For Fewer Contracts

Increased competition for fewer contracts means lower pay or decreased profits or both. Unions are going to be under pressure to give something up (lower wages or lower benefits) to get those jobs.

Furthermore, a 10% cut to the budget of the People's Republic of Oregon is likely way too modest. The $12T in loss in equity to US unreal estate and scam prices equates to a loss to GDP of ~10% (including lost tax receipts to local, state, and federal government) so far from the implied negative wealth effect.

Worst Is Yet To Come


Donald J. Boyd, a senior fellow at the Rockefeller Institute of Government in New York, who tracks state budgets: "What states have done so far -- still generally mild -- pales in comparison to what they will do."

A New Age Of Frugality has already hit consumers. Frugality is now about to hit state budgets big time.

I am in favor of scrapping the Davis Bacon Act so that when the federal government does start the massive infrastructure rebuilding programs that are undoubtedly coming, the most people as possible benefit and the government gets the most work done for the least cost. Under Obama, I expect the opposite to happen. I hope I am wrong.

Ron Paul introduced the Davis-Bacon Repeal Act in 1999. I ask that he take up the cause again.

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

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2008 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife