What could very well be the next shoe to drop in the U.S. recession? State budget deficits. States could be battling deficits totaling as much as $150 billion in 2009, so says economist David H. Wang.
"As many as 44 or 45 states could be facing deficits in 2009," Wang said. "It's probably one of the least publicized aspects of the cyclical downturn, but one the nation will have to address, nevertheless."
The primary deficit culprits? Decreased revenue from income and sales taxes (fewer people working, decreased consumer spending), and increased social service payments for unemployment compensation, and other social services, such as Medicaid, Wang said.
The National Conference of State Legislatures forecasts that states will have to close deficits totaling as much as $97 billion over the next 18-24 months, or by the end of 2010. Wang called the NCSL's forecast, "very conservative, and somewhat dated, particularly in light of recent, weak economic fundamentals."
One example: California, which the NCSL research projects to have an $8.4 billion gap in fiscal 2009. The reality: the California budget deficit is expected to rise to $42 billion over the next 18 months, Wang said.
Fiscal Policy / Economic Analysis: Deteriorating fiscal conditions among the states brings to the forefront the need for federal assistance to them, and so far the incoming Obama Administration says it will be priority number two, just behind infrastructure work and related efforts to jump-start the U.S. economy. Here's hoping the new administration keeps budget relief for the states a top priority.
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Reader Comments (Page 1 of 1)
12-30-2008 @ 6:27PM
Jim Connor said...
I hate what I am hearing about the stimulus package. Word is that our so called "Congressmen" are adding more pork projects than a butcher shop. I only hope that Obama takes names and kicks butts. At a time like this I think their actions are close to treason.
Jim Connor