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State and Local Budget Update

By Anonymous

State and local budgets are a key issue this year. The HuffPo has some details: State Budgets: Year Ahead Looms As Toughest Yet Here are a few states:

New York Gov. Andrew Cuomo proposed eliminating 20 percent of state agencies by combining duties, such as merging the Insurance Department, Banking Department and the Consumer Protection Board into the Department of Financial Regulation. It's part of "radical reform" to pull his state out of its fiscal crisis.

And Gov. Chris Christie in New Jersey skipped a $3.1 billion payment to the state's pension system in a push to cut benefits for public workers, while proposing higher employee contributions and a boost in the retirement age from 62 to 65.

In Illinois, lawmakers voted for a ... hike in personal income tax, from 3 percent to 5 percent, in a bid to resolve a $15 billion deficit ...

In oil-rich Texas ... hard times are looming. The shortfall is projected to be between $15 billion and $27 billion over the coming two-year budget cycle.

In South Carolina, outgoing Gov. Mark Sanford has proposed a spending plan that would end funding for museum and arts programs, slash college funding and give many state employees a 5 percent pay cut.

And on and on. As the article notes, state revenue is slowing increasing this year, but the support from the stimulus program is starting to fade - so this will be another very difficult year for the states.

And from the NY Times: U.S. Bills States $1.3 Billion in Interest Amid Tight Budgets (ht Mr. Slippery)

a new bill is coming due ? from the federal government, which will charge them $1.3 billion in interest this fall on the [$41 billion] they have borrowed from Washington to pay unemployment benefits during the downturn ...

Ouch. Another straw on the camel's back.

These budget cuts and tax hikes will be a drag on growth and employment this year as the states try to get their fiscal houses in order.

Note: Here is the Schedule for Week of January 16th

Full post as published by Calculated Risk on January 16, 2011 (boomark / email).