Monday, June 22, 2009

States Turning to Last Resorts in Budget Crisis - NYTimes.com





States Turning to Last Resorts in Budget Crisis - NYTimes.com


Not news to anyone here, but the discussion (and the chart) of how states are coping with their budget problems is very interesting.

As I asked in an earlier post, how might we account for the variation in approaches to the budget crisis? The chart shows how many states have tried different things, but obviously there is a lot of variation. Why?

And a second question, which states have been hardest hit and which have escaped relatively lightly. Why the variation? Is it all economic or are there political differences across the states that also affect how states have been affected?

8 comments:

  1. Although the article comments that California has the nation’s worst budget deficit at $24 billion, it does not take into account the population of the state. When comparing the deficit per capita, California no longer has the worst in the nation. Take, for example, California and Wisconsin - California has 36.7 million people while Wisconsin has 5.6 million people (U.S. Census Bureau). Although California has 6.5 times more people, its budget deficit is not 6.5 times more than Wisconsin’s budget deficit. Rather, California’s per capita budget deficit is approximately $654, while Wisconsin’s is higher at approximately $1,143, making Wisconsin worse off. Nevertheless, California appears to be in much worse shape than Wisconsin from the point of view of the programs being cut, and the effect on poor people and single parents. -Sarah K.

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  2. I think that the problems are a lot more economical than political with the deficits... In an earlier article, it referenced that some of the few states that are cutting taxes were the ones that were heavy oil extractors (North Dakota, Wyoming, Montana). These states have a solid economy that would be tough to damage as badly as many other states currently are. Meanwhile, things that Wisconsin depends on such as logging and lumber production are being hurt badly with the low demand for building new houses. Though there are many factors that affect the deficit, this is one big difference from state to state,

    - Luke D

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  3. I agree that the problems are more economical than political. I think there is a lot of variation in the approaches states have taken because not every state is experiencing the same issues or has the same programs and policies as others. Different programs and industries are being hurt or prospering more than others in different states, thereby causing each state's government to carry out a solution that is hopefully most beneficial for it to rebound from its current deficit.

    -Leslie W.

    -Leslie W.

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  4. It is interesting to look at the party of the governor for each of the states discussed in the article and how that governor is planning on reducing his or her budget shortfall. In Hawaii, Idaho, and California - all states with Republican governors, cuts are being made to schools, state staff and other public services. In states such as Maine and Wisconsin, as the article notes, taxes are being used to fill gaps in the budget. While I know this is a very broad generalization, it is nevertheless interesting to see the two different parties approach this enormous problem. Jim Doyle's budget calls for $1.7 billion in taxes and additional fees to keep many programs running while Tim Pawlenty moved to cut $2.7 billion across the board, signaling perhaps lower public safety and school budgets amongst other agencies. The difference between a Republican governor and a Democratic governor and how they handled the budget stood out to me when I read the article.

    That said, I still believe that problems are largely economical like Luke and Leslie said. As the article has noted, states have not experienced an economic crisis like the one we are experiencing now in the last 60 years. Every state and every person interviewed in the article expressed deep concern for the upcoming fiscal year and how they would be able to balance their books. Personal income down 6.6 percent, sales tax down 3.2 percent and corporate income revenues down 15.2 percent on average are startling numbers for any state, whether they are in a budget deficit or not. When the economy picks up, more tax revenues will be generated and one will begin to see less of a budget crunch. I hope that states continue to be fiscally smart however, and perhaps decide to expand their 'rainy day funds' if another crisis like this does happen again.

    Additionally, I think it is interesting to look at state spending in the past. I am again being very stereotypical here, but I know that Wisconsin has provided a top quality educational system for years as well as a very comprehensive state health care program. Now, Wisconsin is one of the most heavily indebted states in the Union because they have to continue to try and provide those services with lesser funds. States that have fairly good public services may be more in debt than states that have not had such services.

    Finally, perhaps a question for discussion later - why do states continue to tax the corporations when they are the ones that are providing jobs? I had a staffer tell me that a parts company looked very closely at putting a plant in the Southeastern Wisconsin area but chose Michigan because they offered very little corporate gains tax among other incentives. Should states be taxing businesses for bringing jobs and capital into the region? Or should they take the risk and tax them for additional funds?

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  5. I'm going to go out on a limb here and say that I think that the problems stem from both political and economic issues. I agree with some of what the other bloggers have said, in regards to problems with the economic aspects of the state budget problems. Most certainly these states are all being affected by cuts and are having to make tough decisions, such as selling off state parks (something no state should support but nonetheless, the money has to come from somewhere). But I also think that these issues are political. I think that just as every person has different feelings on what programs are most important, I think that overall states believe certain programs are more crucial than others, or possibly, are just being focused on more than others. In addition, I also think that legislators are looking across the nation at other state's behaviors and trying to see what has worked. States and legislators are trying to be creative in their cuts, and that's where I think some of the variation comes from. And finally, with the question of why certain states seem to be harder hit than others, I think that although most every type of industry has been hit by this depression, I think that obviously it is not the same across the board. Some industries have been hit harder than others and these types of industries (whether hit harder or not) have a direct impact on whether the state has been considered to be "harder hit" than others. Regardless, these states are facing cuts they don't want to make...and that's all there is to it.

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  6. Stephen D., I think you raise some really interesting points. In response to the questions at the end of your post, I think that is a big question many states are facing right now, and one that I think Wisconsin faced specifically. Although it could lead to the loss of a large source of state funds, maybe it is best for states to ease up on their taxation of businesses so as to encourage businesses to move to industrial states like Wisconsin where numerous plants have closed and there have been major lay-offs. Just from paying attention to the news, I have seen that many business owners were threatening to leave the state of Wisconsin since its proposed budget and taxation plans were not in their best interest. States like Wisconsin need to protect the businesses they are home to and work to become appealing places for businesses to move to. Hopefully the economic benefits of having more people employed and more spending ability would help cover the losses from easing up on businesses and help fix the overall deficit.

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  7. I know that there are many different economic situations among the various states, therefore a state's budget should reflect these different business and economic differences. However, I think that the differences in the budget are very political as a result of the differences in a states' economies and businesses important to said state's economy. For different states governors may feel certain pressure from lobbyists and voters to include their items in the budget. For Wisconsin, highways are very important for everything from commuting to work, to transfering farm products regionally, to tourism which helps our state economy. Therefore by seeing this importance and with roads aging the Governor had a large need to find funding, which the oil tax makes the most sense to fund. As state's struggle to find solutions to government debt I think Governor's have to follow their various pressures from constituents and lobbyist groups that may fund their campaigns or may provide needed jobs to not add to the growing unemployment rate. The greatest problem I have with the way our Governor is trying to fix the debt is the way in which he hides tax increases by including them as hidden user fees.
    -Lauren C

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  8. Our government in Wisconsin is also suffering form some hard times. Having the state employees take furlough days is in my opinion necessary, but not if it cmes from the working peoples wallets. Has the nation gone mad? Is there a temporary stage where you borrow money form schools and promise to give it back? The epitome of story is when the state starts taking away from its own infrastructure in an attempt to do some branch method welding. I hope to learn more and understand how things can or could be better. I agree with Lauren C in that our Governor is sneaky, but tono avail, he has to respond positively towards the pressures surrounding him. I hope Wisonsin finds a way. I thought the movies were a good idea, encouraging film production here. Wisconsinhas beautiful scenery and should embrace the natural set...

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