Sorry States

Budget shortfalls will add to Washington's woes.

Just before President Obama projected tides of red ink for years to come, New York City Mayor Michael Bloomberg faced up to his own budget Waterloo.

His $63.6 billion budget proposed to cut money from libraries and schools, increase caseloads for child services workers, eliminate 20 fire companies, close four community swimming pools and raise parking fees. He warned that the state budget proposed by Gov. David Paterson would sharpen the pain, forcing layoffs of 8,500 teachers, 3,150 police officers and many other municipal workers.

New York is not alone: the National League of Cities projects that municipalities will face a shortfall of between $56 billion and $83 billion from 2010 to 2012. State governments face an even larger budget gap.

For people who care about the public sector, these are alarming trends-and portents of what's in store for the federal budget as well.

Federal spending for many years has run at about 20 percent of gross domestic product. Economic recovery spending has now kicked that total up to about 25 percent of GDP. With state and local government consuming another 11 percent of GDP, the public sector now accounts for more than a third of the nation's output. And it's hurting everywhere.

States' general fund spending has been growing at a rapid rate-by 36 percent between 2003 and 2008, compared with 32 percent growth in national GDP and a 17 percent increase in the Consumer Price Index, according to E.J. McMahon, senior fellow at the Manhattan Institute for Policy Research. In New York, Lt. Gov. Richard Ravitch has decried this sort of "spending addiction." States' aggregate budget shortfalls in 2011 and 2012 could total $350 billion, estimates the Center on Budget and Policy Priorities.

In its November 2009 report, "Beyond California: States in Fiscal Peril," the Pew Center on the States noted that the Golden State had unsuccessfully sought a $7 billion loan guarantee to pay its bills, issued IOUs to state employees and other creditors, and started shutting state offices several days a month. While this placed California in a league of its own, "the same pressures that drove it toward fiscal disaster are wreaking havoc in a number of states, with potentially damaging consequences for the entire country," the report says.

Nine states are particularly affected, according to Pew: Arizona, Nevada, Oregon, Florida, Illinois, Michigan, Wisconsin, New Jersey and Rhode Island. In Oregon, school districts cut back to a four-day week for lack of money, spurring voters to narrowly pass a referendum in January raising taxes on high earners and on businesses. In Illinois, legislators faced a $12 billion hole in a $26 billion budget. In Florida, Gov. Charlie Crist shocked the nation when he ordered a halt to medical mercy flights from Haiti until Washington agreed to cover the costs.

"These states' budget troubles can have dramatic consequences for their residents: higher taxes, layoffs or furloughs of state workers, longer waits for public services, more crowded classrooms, higher college tuition and less support for the poor or un-employed," the Pew report notes. Forty-eight states face budget shortfalls in 2010. This year, stimulus money is covering 30 percent to 40 percent of the shortfalls in most of them. In New York, a budget deficit estimated at about $8 billion in the fiscal year beginning April 1 could be in the range of $18 billion to $20 billion the following year, as stimulus funding winds down.

The wolf is at the door of city halls and statehouses across the nation. With federal debt growing fast enough to worry even our foreign creditors, his howl certainly is getting louder in Washington too.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

    Download
  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

    Download
  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

    Download
  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

    Download
  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

    Download
  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

    Download
  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

    Download

When you download a report, your information may be shared with the underwriters of that document.