Austerity Means Never Having to Say You're Broke!
Let's hear it for the states of these United States! Faced with long-term looming, booming structural deficits, they have started spending more, not less. Sez the WSJ:
The total spending of all state budgets for fiscal 2011, which for most states began July 1, rose 5.3% to $645.1 billion from the year before, according to a report from the National Governors Association and the National Association of State Budget Officers to be released Wednesday. This follows two years of lower spending amid a grueling recession.
Tax revenues are up but still below where they were before the recession kicked in. But just like the idiots they were back in the earlier part of the decade (when they jacked spending by 50 percent above the rate of inflation), the states have responded to modest upticks in revenue by spending yet more.
In the current fiscal year, states are collecting more taxes as a result of rising income and sales taxes. They also enacted $6.2 billion in new taxes and fees. In fiscal 2010, states enacted far more new taxes and fees, $23.9 billion.
Unlike the federal government, almost all states are required to balance their budgets. In the 2011 fiscal year states forecast they would use some $43.2 billion in stimulus money to balance their budgets.
Well, the stimulus money is drying up and guess what? Most states are hiding far bigger deficits and debt loads than they're copping to. Sez the New York Times:
The finances of some state and local governments are so distressed that some analysts say they are reminded of the run-up to the subprime mortgage meltdown or of the debt crisis hitting nations in Europe.
Analysts fear that at some point — no one knows when — investors could balk at lending to the weakest states, setting off a crisis that could spread to the stronger ones, much as the turmoil in Europe has spread from country to country….
Many governments are delaying payments to their pension funds, which will eventually need to be made, along with the high interest — usually around 8 percent — that the funds are expected to earn each year.
New York balanced its budget this year by shortchanging its pension fund. And in New Jersey, Gov. Chris Christie deferred paying the $3.1 billion that was due to the pension funds this year.
It is these growing hidden debts that make many analysts nervous. States and municipalities currently have around $2.8 trillion worth of outstanding bonds, but that number is dwarfed by the debts that many are carrying off their books.
State and local pensions — another form of promised debt, guaranteed in some states by their constitutions — face hidden shortfalls of as much as $3.5 trillion by some calculations. And the health benefits that state and large local governments have promised their retirees going forward could cost more than $530 billion, according to the Government Accountability Office.
As the Times' notes, the worst is yet to come. "States and cities typically face their biggest deficits after recessions officially end, as rainy-day funds are depleted and easy measures are exhausted."
What part of We Are Out of Money don't they understand?
Hat tip: Alan Vanneman.
