Wednesday, January 12, 2011

Desperate Economy = Desperate Choices

California has an enormous deficit. Incoming Governor Jerry Brown laid out what the NY Times referred to as his "Grinch-like budget."

The budget is meant to address an estimated $25.4 billion deficit, just the latest shortfall for a state that has experienced a drumbeat of bad economic news in recent years. But Mr. Brown, who took office last week, cast the blame even further, saying the state’s leaders had spent the last decade balancing their books with “gimmicks and tricks and unrealistic expectations that pushed this state deeper and deeper into debt.”

But that period, Mr. Brown repeatedly emphasized, was over.

He's spreading the pain around a little, but as always budgets are balanced on the backs of the poor:

In terms of sheer dollars, the steepest cuts affect the most vulnerable in the state, including a $1.7 billion cut to Medi-Cal, the state’s health insurance program for poor families and disabled people; a $1.5 billion reduction in its welfare-to-work program; and $750 million cut from the agency that provides services to those with developmental disabilities.

The state’s higher education system — including the highly regarded University of California — would lose $1.4 billion. The president of the university, Mark G. Yudof, who has dealt with protests at several campuses over tuition increases, called it “a sad day for California,” but he seemed to recognize the gravity of the state’s bind.

Those darned poor people have lousy lobbyists.

Illinois is also in deficit trouble:

Many states are struggling with anemic revenues and the prospect of an end to additional federal funds, but Illinois faces a budget deficit of as much as $15 billion, owes some $8 billion in unpaid bills to social service agencies, doctors, dentists and others, and is receiving mounting signs of worry from bond investors.

Their solution:

With only hours left before new state lawmakers were to take over, Illinois’s State Legislature narrowly approved early on Wednesday an increase of about 66 percent in the state’s income tax rate.

That's a substantial increase.

Under the legislation, the income tax rate would, at least temporarily, rise to 5 percent from its current rate of 3 percent. Lawmakers had talked about an even steeper increase, but set that aside as the hours went by and the debate grew increasingly emotional. The rate for corporate taxes would rise to 7 percent from its current rate of 4.8 percent. As part of the deal, the state’s spending growth would be limited from one year to the next over the next four years.

Despite the constantly dangled carrot of "economic recovery" by economists - most states are in financial trouble. Huge levels of unemployment have resulted in revenue streams that are barely trickling. Still - as I wander through the world, I hear no acknowledgement in the mainstream media or from any of our elected officials of how serious the jobless rate really is. Until Americans are working again, states are going to continue to have to make these sorts of choices.

Cross-posted at MainSt/

1 comment:

DissedBelief said...

State and federal government should always set the example with prudent and practical spending and plenty of saving for that rainy day. Only in one's dreams. A very long time ago when I worked for a local "establishment" I was informed it was "only state funded 1%. Then I discovered that the state was purchasing homes and in order for them to be "to code" had to plunge thousands and thousands of tax payer dollars into them (to bring them "up to code"). They are all now for sale with a slim to no chance of actually selling. That easily spent money will never ever be recouped. I don't know of any state that spent the easy money in easy times on infrastructure, education, health care and other necessities of life. I do know a lot of the money went to satiate lobbyists and those others with closer alliances to the state house. And here we are. Now the hard times are rolling and your'e right Susan. I never ever hear or read about unemployment. It really is 1984.