Best of the Week
Most Popular
1.Dow Stock Market Trend Forecast 2015 by Nadeem Walayat - Nadeem_Walayat
2.Gold And Silver – Forget The News. Silver $12 – 14? Gold $1,000 – 1,100? 5 - Michael_Noonan
3.A TOP Formation In Apple Inc. - Crash Condition Signal Recorded - David Harris
4.Gold Gets Safe Haven Bids But COMEX Has Stopping Power - GoldSilverWorlds
5.The Swiss 10-Year Bond Illustrates Central Banks` Flawed Monetary Policy - EconMatters
6.Exponential Explosions in Debt, the S&P, Crude Oil, Silver and Consumer Prices - DeviantInvestor
7.“Forgive Us Our Debts” – Only Way To Prevent Economic Meltdown - GoldCore
8.Is Russia Planning a Gold-Based Currency? - Marcia Christoff-Kurapovna
9.Stock Market Trend Forecast 2015 Video - Nadeem_Walayat
10.Gold GDX ETF Technical Analysis - Austin_Galt
Last 5 days
Subprime Rising - U.S. Debt Breaking Bad Part 2 - 1st Mar 15
Gold CoT Improving, But ... - 1st Mar 15
UK General Election 2015 Seats Forecast - Who Will Win? - 28th Feb 15
UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - 28th Feb 15
Stocks Bull Market Continues - 28th Feb 15
U.S. Debt Breaking Bad - 28th Feb 15
NATO Frankenstein - When Centralization Scales Beyond Our Control - 28th Feb 15
Gold And Silver Insanity Prevails; Precious Metals Without Direction - 28th Feb 15
Fed Raising U.S. Interest Rates - Shovelin’ Schmitt Against the Tide - 28th Feb 15
Don't Let This Stock Market Myth Cost You Your Gains - 28th Feb 15
Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - 28th Feb 15
Stock Market Indexes Creeping Towards the Edge - 28th Feb 15
GGD Going for Mexican Gold - 27th Feb 15
Foreign Real Estate Is the New Swiss Bank Account - 27th Feb 15
10 Reasons Washington Has War Fever - 27th Feb 15
Gold and the Euro Tragedy, Iraq 3.0, Ukraine Conflict Three Ring Circus - 27th Feb 15
Deepak Chopra - New Age Genius or Bullshit Expert? - Video - 27th Feb 15 - Videos
New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - 27th Feb 15
Will Month Long Stocks Rally Continue? - 27th Feb 15
The Only Public Hedge Fund You Should Own - 27th Feb 15
UK House Prices Trend 2015 and the May General Election - 27th Feb 15
Why America is Ungovernable - The Republicans’ Civil War - 27th Feb 15
Gold vs Gold Stocks: Bullish Anomaly Developing? - 27th Feb 15
I Heart Capitalism, Nasdaq Stocks, Then And Now - 27th Feb 15
The Fed’s History of Assassination - 27th Feb 15 i
Gold Bull Market Forecast - Money Will Rotate Into These Dead Investments - 27th Feb 15
"Audit the Fed"? We've Already Done That (Well, Kind of) - 26th Feb 15
Forget Peak Oil; Worry About Peak Demand - 26th Feb 15
Currency Wars, Again - 26th Feb 15
The Fed Waited Too Long: Here Comes Inflation - 26th Feb 15
Investing Inertia Won’t Keep Your Cash Safe - 26th Feb 15
The Net Neutrality Scam - 26th Feb 15
Will Conservatives Out of Control Immigration Crisis Boost UKIP Election 2015 Prospects? - 26th Feb 15
EU Warns Ireland and Euro Zone of Debt Dangers - 26th Feb 15
Commodity Prices Set To Plunge Below 2008 Lows - 26th Feb 15
Ukraine Hyperinflation as Currency Plunges 44% in One Week! - 26th Feb 15
The State of the Global Markets 2015 - 53 Page Report - 26th Feb 15
NASDAQ New 15 Year High - Stock Market Death By Overdose - 25th Feb 15
12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - 25th Feb 15
Sugar Commodity Price To Sweeten Up - 25th Feb 15
Investor Profits from China 2,000-Year Unstoppable Trends - 25th Feb 15
How to Borrow Cheaply from a Government-Owned Bank - 25th Feb 15
Debt Be Not Proud - 25th Feb 15
Liberal Democrat Election Blood Bath - Could Nick Clegg Lose Sheffield Hallam? - 25th Feb 15
Wheat Commodity Price Technical Trend Forecast - 24th Feb 15
Bitcoin Price Might Stay below $250 - 24th Feb 15
Another Important Stock Market Inflection Point Approaching - 24th Feb 15
Gold: The Good, Bad, and Truly Ugly - 24th Feb 15
Eurozone Gold Holdings Increase to 10,792 Tonnes As “Reserve of Safety” Amidst Crisis - 24th Feb 15
Bird Doo; Yellen Goes to Congress - 24th Feb 15
Is Gold Investing Risk Free? - 24th Feb 15
The Bull Case For Gold Price 2015, and the Bear - 24th Feb 15
Europe - The Intersection of Three Crises - 24th Feb 15
Gold Price Just Needs More Time - 24th Feb 15
Gold Price Downtrend Looks Set to Continue - 23rd Feb
Silver Price Depressing Downtrend Will Eventually End - 23rd Feb 15
5 Reasons Why You Should Sell Amazon Stock - 23rd Feb 15
Global System Catastrophe Is Key Threat To Human Civilisation - 23rd Feb 15
Greece Crisis Yields Ideal Market Opportunities - 23rd Feb 15
Gold and Silver Stocks or General Stock Market Indices? - 23rd Feb 15
Swimming With Sharks: Goldman Sachs, Schools and Capital Appreciation Bonds - 23rd Feb 15
Stock Market - The Fed Still Has Your Back - 23rd Feb 15
Soybean Commodity Price Technical Outlook - 23rd Feb 15
Gold Weekly COTs and More - 23rd Feb 15
Stock Market New Highs With Weak Breadth - 23rd Feb 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The State of the Global Markets 2015

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

© 2005-2015 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

Free Report - Financial Markets 2014