The Economic Crisis Comes to a State Near You

States are feeling the grip of the Great Recession.

1. State Budget Blues, Marianne Hill.

2. The Economic Crisis in the States, Gerald Friedman.

State Budget Blues

By Marianne Hill

California’s fiscal woes may have grabbed the national headlines, but states across the nation are slashing budgets to close gaps that are averaging a jaw-dropping 24% this year. Even before the economy nose-dived in late 2008, the Government Accountability Office (GAO) was warning states to expect growing revenue shortfalls over the coming decade. The recession and the staggering increase in the federal debt have worsened the GAO’s predictions.

The GAO now estimates that, if programs are maintained at current levels, state and local revenues will fall short by an average of 7.6% annually over the coming decade.

Read the rest at Dollars and Sense.

The Economic Crisis in the States

By Gerald Friedman

In recent recessions, state and local governments have been among the few sources of economic stability and employment growth. This is why the recent fall in government employment, including a loss of 37,000 local government jobs in September 2009, has alarmed, even shocked, observers. But without serious action, a sharp drop in government employment, with a loss of a million jobs or more, is what we can expect over the next year. This has implications for the economy as a whole and also for the well-being of large parts of the American public who depend on state and local government services. Two intrinsic features of the American system of government come together to threaten a social disaster: the limited capacity of state and local governments to spend beyond their immediate revenues even in the harshest economic crises, and our peculiar federal system in which education and social services are largely funded by local and state authorities rather than by the federal government, with its deep pockets and ability to spend beyond its revenues as needed to maintain existing services.

Read the rest at Dollars and Sense.

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