Hidden State Financial Crisis? -fiscal years(s)end June....

Discussion in 'Economy' started by Trajan, May 18, 2011.

  1. Trajan

    Trajan conscientia mille testes Staff Member

    Jun 17, 2010
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    The Bay Area Soviet
    whose ready for more good news!!!!!!!!!!!!:clap2::lol:

    For those of us living in Kalifornia, we already know our goose is cooked....in fact its been cooked and thats not enough, we are now on the hook for the desert bill and liquor tab too...

    while Arnie was schtupping niki diaz or whomever for the last 7 years, we have been subject too an increase of 4.5% in taxes averaged over all Kali. counties cites municipalities etc. and its not even crunch time really, yet.....

    The Hidden State Financial Crisis

    * MAY 18, 2011
    My latest research into opaque state financial statements suggests taxpayers will be surprised by how much pensions are underfunded.

    Next month will also mark the end of the American Recovery and Reinvestment Act's $480 billion in federal stimulus, which has subsidized states through the economic downturn. States have grown more dependent on federal subsidies, relying on them for almost 30% of their budgets.

    The condition of state finances threatens the economic recovery. States employ over 19 million Americans, or 15% of the U.S. work force, and state spending accounts for 12% of U.S. gross domestic product. The process of reining in state finances will be painful for us all.

    The rapid deterioration of state finances must be addressed immediately. Some dismiss these concerns, because they believe states will be able to grow their way out of these challenges. The reality is that while state revenues have improved, they have done so in part from tax hikes. However, state tax revenues still remain at roughly 2006 levels.

    Expenses are near the highest they have ever been due to built-in annual cost escalators that have no correlation to revenue growth (or decline, as has been the case recently). Even as states have made deep cuts in some social programs, their fixed expenses of debt service and the actuarially recommended minimum pension and other retirement payments have skyrocketed. While over the past 10 years state and local government spending has grown by 65%, tax receipts have grown only by 32%.

    Off balance sheet debt is the legal obligation of the state to its current and past employees in the form of pension and other retirement benefits. Today, off balance sheet debt totals over $1.3 trillion, as measured by current accounting standards, and it accounts for almost 75% of taxpayer-supported state debt obligations. Only recently have states been under pressure to disclose more information about these liabilities, because it is clear that their debt burdens are grossly understated.

    What concerned us the most was the fact that fixed debt-service costs are increasingly crowding out state monies for essential services. For example, New Jersey's ratio of total tax-supported state obligations to gross state product is over 30%, and the fixed costs to service those obligations eat up 16% of the total budget. Even these numbers are skewed, because they represent only the bare minimum paid into funding pension and retirement plans. We calculate that if New Jersey were to pay the actuarially recommended contribution, fixed costs would absorb 37% of the budget. New Jersey is not alone.

    The real issue here is the enormous over-leveraging of taxpayer-supported obligations at a time when taxpayers are already paying more and receiving less. In the states most affected by skyrocketing debt and fiscal imbalances, social services continue to be cut the most. Taxpayers have the ultimate voting right—with their feet. Corporations are relocating, or at a minimum moving large portions of their businesses to more tax-friendly states.

    more at-

    Meredith Whitney: The Hidden State Financial Crisis - WSJ.com
  2. B. Kidd

    B. Kidd Gold Member

    Jun 15, 2010
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    Western Lands
    44 states and the District of Coulumbia face daunting budget crisis for the fiscal year 2012 that begins on 7/1/11. Federal stimulus money is ending soon combined with the fact that states are running out of ways to enhance revenue while experiencing the biggest decline in tax receipts since the 1930's. More public sector layoff notices are in the mail.

    If it is still hidden, it won't be hidden much longer.

    States Continue to Feel Recession
    Last edited: May 18, 2011

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