State Budgets Unlikely To Get Federal Assistance

Even as widening state budget deficits are becoming a potential stumbling block for economic recovery, Federal assistance seems unlikely.

With Washington lawmakers focused on getting the Federal budget in order, the prospect of aid for struggling states has all but left the conversation, the Washington Post reports. States and local governments face a fiscal crisis, experts say, since the Great Recession withered their revenue. Finding it increasingly difficult to meet their basic obligations, governments across the nation have had to lay off thousands of workers and will likely have to lay off many more, just to keep their fiscal houses in order.

With the unemployment rate around 9 percent, the economic recovery remains fragile. State budget cuts could make the situation worse, the Associated Press reported. As governments cut spending on education, jobs and safety net programs, average Americans, who are already contending with rising fuel prices, could see their economic situation worsen.

The present state budget dilemma would likely be far more severe without the Federal dollars that are currently propping up state budgets. As part of the stimulus package, states received Federal money to compensate for weakened revenue streams. Currently, that assistance covers about a third of state budget shortfalls, according to a recent report from the Center on Budget and Policy Priorities.

Federal assistance is quickly running dry. Next fiscal year, a total of about $6 billion will remain. State budget deficits will have grown to a combined $125 billion, according to the report.

As spending outpaces revenue, states have few solutions. State tax collection is currently 12 percent below pre-recession levels, according to another report from the Center on Budget and Policy Priorities. As the appetite for tax hikes remains virtually non-existent, savings will come from the other side of the ledger.

Already, states have cut 400,000 workers since 2008, the Washington Post notes. If they were to balance their budgets solely by laying off employees, another 850,000 workers would be dismissed.

State pain impacts budget troubles on the municipal level. Newark, New Jersey, for instance, has seen aid from the state drop by 40 percent between 2008 and 2010. As a result, Newark has had to make some difficult cuts, including laying off 13 percent of its police force.

New Jersey is expected to have a budget shortfall equal to about 37.4 percent of its current budget, according to the Center on Budget and Policy Priorities. Other states face bigger deficits: Illinois' projected shortfall is 44.9 percent of its current budget. Nevada's is 45.2 percent.

Federal lawmakers deprived states of one potential source of revenue when they allowed the Build America Bonds program -- which used Federal money to make it cheaper for states to borrow money -- to expire in December.

Comments

[robert horwitz]

06:17 PM on 03/17/2011

The real fun will begin when the newly elected as they call themselves Republican Conservatives return to their home districts and they find themselves running for their lives and I mean literally because their constituents begin to realize how all this cutting affects them. I sure hope that they like the smell of hot tar and feathers.

[InBirmingham]

02:12 PM on 03/01/2011

With everything going on in Wisconsin, I'm a bit surprised that HuffPo has not yet mentioned today's article from USA TODAY in which statistics are shown in 41 states where public sector workers are paid substantially more than private sector workers, and a great deal of that compensation adds up to benefits upon retirement.

[Pandoras Folly]

08:40 AM on 03/02/2011

working in the public sector = lower average pay but better retirement benefits
working in the private sctor = higher average pay but much more uncertain and lower retirement benefits

buddy of mine graduated as a civil engineer. public pay was 2/3 that of a private wage, but the retirement was much better publically. The only situation were this is reversed is teaching.

[InBirmingham]

05:01 PM on 03/02/2011

Pandora, thanks for the response. All figures I've seen have shown that the average public sector worker makes over $65,000 per year as opposed to the average private sector at $45,000. The pensions are solidified because they're guaranteed amounts whereas the private sector (401ks, etc) are dependent upon the insecurity of stock market, etc.

[shadow013]

07:10 AM on 03/01/2011

My Midwestern state and the towns and school districts in it have been quietly cutting expenses. It's hard. Some of the things so controversial in Wisconsin's capitol were adopted here over a year ago. This state was hard hit by sending jobs to China in the past 10 years. Seems we've gone Tea Party fiscally responsible, but we don't get economic growth or fiscal responsibility out of Washington no matter who is president. The last thing we want to do is bail out California. We didn't want to bail out the big banks that leveraged the big crash from which none have recovered except the big banks.

[colourful]

03:11 AM on 03/01/2011

Another question is, "Why are corporations sitting on record profits; yet, not hiring workers?" We could also throw in, "Why aren't we mad as he11 at those hoarders?

[mike dougles]

02:04 PM on 03/01/2011

There is nothing that says they have to hire.

[colourful]

03:29 PM on 03/01/2011

If they don't have to hire, then shouldn't we expect our government to hire to ensure work is available? Or, do we want all of our citizens applying for welfare?

They don't have to hire, and they don't need tax breaks.

[ndlekas]

02:21 AM on 03/01/2011

I know this is bad to say but it needs to be said. Healthcare is the problem and who uses healthcare? The elderly. They need to stop using the health care system like they do. I know a hardcore republican that has used millions of dollars worth of Medicare without a thought. When he found out he had to do kimo, he said he didnt want to and they forced it on him. This is the problem...........and the military

[Peanut Santiago]

11:41 PM on 02/28/2011

Starve the beast.

That is what the voters want.

Who am I to complain (too much)?

Of course extending tax cuts, deregulating banks and Wall Street and letting them take huge risks, having a long term unfunded war......are NOT good ideas.

But who am I, a nobody, to try and outguess the experts?

[shadow013]

07:25 AM on 03/01/2011

You make so much sense about the NOT good ideas. Common sense doesn't rule. The direction in which the government is headed is enough to fuel conspiracy theorists, as in take the U.S. down and form a one-world government run by the money-elites. Conspiracy or greed, it goes the same direction.

[rtx47]

11:31 PM on 02/28/2011

About third of all municipal budgets is for Medicaid and other social services. Things are bursting at the seams. Govt can no longer afford to solve our individual problems.

Families have the duties and responsibilities to help their relatives. The indigent have the duty and responsibility to swallow their pride to seek help; and live within the norms and boundaries of their family.

I know from personal experience some of my own relatives who need / could do with help. But they want "their space" and the freedom to go to bed and rise when-ever they want to. And that will just not work with the boss of the home.

Govt has a role to solve 'big picture' problems of society. When govt tries to solve individual problems, it undercuts the family as a unit of society. Family - first and second degree relatives has been the conner-stone of human and animal survival i.e. it is in our genes.

We think we'll change life with a mobile society; and palming our responsibilites (for each other) to the govt. Just doesn't work. All we did is pass our costs (15.5Trillion federal debt and 2.4T local/state debt) to yet-to-be-born Americans.

We've created many vested economic interests who feed-off the poor and indigent in a trickle-up wealth and economy; who will not give up easily. Right now the only realistic solution is to "starve the beast"; and use a saftey net for the truly indigent.

[Peanut Santiago]

11:49 PM on 02/28/2011

I am sure many unemployed people prefer jobs and to live separately.

It is going to be fun watching families get used to living together for survival. Amusing.
Unless you are one of those who HAVE to do it.
THEN it may not be so funny.

Also, you talk about a "safety net."
Why do some of us lack confidence in that idea?

We can always bring back the poor houses, debtors prison, AND build more regular prisons for those "families" that devolve into domestic violence.

Simply put, by taking away decent conditions for a large portion of the lower classes, social unrest will increase and society will be destabilized.
Also, desperate people are more likely to turn to crime.

[Hysterian68]

11:30 PM on 02/28/2011

"New Jersey is expected to have a budget shortfall equal to about 37.4 percent of its current budget, according to the Center on Budget and Policy Priorities".

Governor Christie should have the Mafia pick up the bill. They're the only ones in New Jersey who aren't contemplating leaving the state , and along with the pharmaceutical companies are making big profits. Since they contribute mightily to police pensions, why not have them pick up the pension liabilities of the other state employees as well.

[Hysterian68]

10:28 PM on 02/28/2011

The problem is to prop up the economy of approximately 46 states which have been models of profligacy, fraud, and just plain old kicking the can down the street (by the Governors and the state legislatures). Now it is payback time.
Since the early 1960s, states have received subsidies from the Federal Government in the form of matching funds and block grants for untold numbers of social programs. The states used those funds and employee pension funds for other purposes. A classic case of robbing Peter to pay Paul, leaving Peter with countless IOUs which are now coming due. There is no money left to pay Peter.

Your money has been blown by the drunken sailors you elected (Repubs and Demos). Now there's nothing left for firemen, teachers, police, sanitation workers, garbage collectors, and other bureaucrats.

Politicians have to scramble to cover those IOUs. With a recession in full force, you can't raise taxes. So, firing them is all you can do, and send the governor and state legislators to the firing squad.

[Enid]

10:58 PM on 02/28/2011

Your facts are not correct.
Your running scared.

[Hysterian68]

11:03 PM on 02/28/2011

There are none so blind as those who fail to see. Just wait, you'll see I'm right.

[Hysterian68]

10:16 PM on 02/28/2011

"If they were to balance their budgets solely by laying off employees, another 850,000 workers would be dismissed".
---------------------------------------------------------------------------------------------------------------------------
IF??? The states have no choice. Do you increase property taxes, the state sales tax, the state income tax with a REAL unemployment rate of 18% and employers relying more and more on hiring part-time workers? Firing people is YOUR ONLY way to balance the state's budget.

[holyghostie]

09:48 PM on 02/28/2011

Politicians never fix anything...except on occasion an election.

[Mister Bill]

09:48 PM on 02/28/2011

Is this the the beginning of the Great Recession II. This is the exact path that FDR took us down in the 30's. If we are not careful we will be overtaken by the enemies of the Republic. “I apprehend no danger to our country from a foreign foe.…Our destruction, should it come at all, will be from another quarter. From the inattention of the people to the concerns of their government, from their carelessness and negligence, I must confess that I do apprehend some danger. I fear that they may place too implicit a confidence in their public servants, and fail properly to scrutinize their conduct; that in this way they may be made the dupes of designing men, and become the instruments of their own undoing. Make them intelligent and they will be vigilant, give them the means of detecting the wrong, and they will apply the remedy.” (Daniel Webster, Works, 1:403.) As true then as now.

[kingbarry]

08:08 PM on 02/28/2011

Right to work laws will help to ameliorate the union wage and retirements expense that is driving most states to bankruptcy

[Gonads]

09:04 PM on 02/28/2011

I agree, union membership should be a choice, not a requirement. Freedom of choice!

[REDSTATEREFUGEE]

06:33 PM on 02/28/2011

As a recipient of some of the hard realities of California budget restrictions, in the form of a reduced teaching load this coming fall semester, I still believe that each state needs to struggle to emerge from the financial chaos that our entire nation has fallen into. Washington has more than enough major budget concerns without adding to our U.S. deficit.

In California, IMHO, we began our downhill slide into a $26 billions deficit way back in the late 1970's with Proposition 13, limiting homeowner taxes. Since then, and expecially in the last five years, legislative Democrats and the electorate through new propositions have introduced new spending measures, as if there were no tomorrow.

Simulataneously, state Republicans have resisted new taxes to help pay for all of the increased spending, assuring that fiscal reality would one day strike us in the face, as it has now done. Perhaps the Golden State will emerge from this crisis healthier and more prosperous than ever, having been sobered by the exprience, but I predict it will take years for us to do so.....

[kingbarry]

08:09 PM on 02/28/2011

hmm if you can't pay the bill why are they spending more $$ my 5 year old knows better, guess dems not so much

[REDSTATEREFUGEE]

07:15 AM on 03/01/2011

I salute your five year old, KB, for he seems more intelligent than Texas Republicans, who have spent themselves into a $26 billions deficit, just like California, except that, per capita, the Lone Star State is in even worse shape..... Recall, as well, that, in the eight years of the Bushreich, our national deficit soared, primarily because of GWB's military adventures overseas.

[Mister Bill]

09:55 PM on 02/28/2011

Just another vote for the old adage: If you dance to the tune, You must pay the piper. If nobody will take the responsibility to be economically honest, you will get what California has now. You cannot say that you can pay people like they are kings when you have the budget of a pauper. The people of California have outsmarted themselves.

[dweezil52]

05:31 PM on 02/28/2011

"Why State Budget Woes Won't Be Fixed In Washington"?

Because DC can't find their a** with both hands in taking care of their own business.