Cascading economic problems flowing from the crisis on Wall Street are forcing states to urgently redraw their financial blueprints for the rest of this year and next to cushion the impact of the credit squeeze, staggering paper losses for millions of ordinary Americans and soaring energy prices.
California, which just ended a record 85-day budget impasse, fears its newly-approved plan to balance its books is already $1 billion in the red.
Utah cut most state agency budgets by 3 percent in a Sept. 24 special session, and Oregon Gov. Ted Kulongoski (D) has rescinded a 3.2 percent pay raise for agency directors in his state.
In New York, the epicenter of the financial cataclysm, Gov. David Paterson (D) is laying the groundwork for a special legislative session to deal with conditions that he expects will add $1 billion to the state’s $6.4 billion deficit. New York, along with New Jersey and Connecticut, will be hard hit by the layoffs of thousands of financial industry employees – by some estimates, the financial sector accounts for as much as one-fifth of their revenues.
“The feeling in the states is that this is going to be a tough fiscal 2009, and 2010 is looking difficult,” said Scott Pattison, executive director of the National Association of State Budget Officers.
The tidal wave of bad news comes on the heels of an already brutal budget year that forced states to dip into rainy day funds, implement hiring freezes and put off projects to collectively plug deficits of more than $40 billion in their fiscal 2009 budgets — triple the $13 billion shortfall they weathered the previous year.
Here’s a rundown of recent state action to deal with the financial emergency:
Florida: Lawmakers moved $672 million from reserves to chip away a projected $1.5 billion deficit for this year. That’s on top of the 4 percent cut Gov. Charlie Crist (R) imposed on all state agencies a day after he signed the new budget.
Hawaii: Gov. Linda Lingle (R) postponed selling $625 million in bonds, saying the state would get a better deal waiting. Some analysts expect the national downturn to lead to a recession in Hawaii as tourism has been hit hard.
Massachusetts: Gov. Deval Patrick (D) is mulling a special session and wants the Legislature to give him broader authority to make emergency budget cuts because tax collections are running $200 million less than a year ago.
Maryland: Gov. Martin O’Malley (D) has directed state agencies to look for budget cuts of up to 5 percent to make a dent in a projected $1 billion deficit by 2010. The governor also is banking on voters Nov. 4 endorsing a ballot measure to legalize slots, a move that proponents say would bring the state $500 million.
Missouri: The turbulent credit market has prompted the state to drop its one-of-a-kind plan that would have combined the design and construction of 800 bridges into one contract.
Pennsylvania: Gov Ed Rendell (D) directed state agencies to reduce spending and eliminate out-of-state travel with the aim of cutting $200 million from this year’s budget.
Virginia: Facing an estimated $3 billion deficit over two years Gov. Tim Kaine (D) plans to start cutting next month and legislators will review the cuts in January.
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Filed under: Uncategorized on October 17th, 2008