Skip to comments.States, Localities Face Deeper Crisis
Posted on 10/09/2008 4:22:56 PM PDT by TigerLikesRooster
States, Localities Face Deeper Crisis
The Bond Buyer
By Lynne Funk
October 8, 2008
State and local governments are facing a fiscal crisis that will be far worse than the 2001 recession because sharp declines in income and sales tax collections will lead to more widespread budget cuts in the months ahead, a new Rockefeller Institute of Government report warns.
But governments may have to issue more debt as a result of their financial difficulties, according to Don Boyd, the author of the report, titled The Damage is Just Beginning, and other market participants.
Boyd said he expects a major drop in income tax revenue in the April-to-June 2009 quarter that will make the current fiscal difficulties even worse than the "very bad" crisis following the mild 2001 recession. The state tax revenue report, which the institute releases quarterly, focused on data from April to June of this year.
"If you remember the last recession, [it] was mild," Boyd said. "If you remember its impact on state governments, though, it was huge against historical standards. It was dramatically bad. At the early part of this particular crisis, it looked hard to believe that it could be back as bad as the last one. The last one was essentially a 50-year event. This one now looks worse."
(Excerpt) Read more at financial-planning.com ...
This isn’t bad news. Anytime government deadheads lose their jobs it represents progress.
Good, maybe they can learn something about fiscal responsibility and cut spending. We hope this is the final resolution they arrive at.
Thankfully, such things are taking place in my own town. I was speaking with a Council member and he sheepishly told me they were cutting funding, and I told him, “Good! That’s what I want to hear.”
He was a little surprised by my response.
States and localities are going to get to make a choice - keep the roads paved so people with jobs can get to work, or to buy votes with welfare. Wonder which one they’ll pick?
How exactly is this a bad thing?
Remember, the purpose of tax cuts is not to INCREASE government revenue.
The purpose of tax cuts, the goal of our movement, is to STARVE THE G-Damned BEAST until it FALLS OVER DEAD!
New Jersey has a SOLUTION to this problem. WE are going to TAX the living CRAP out of homeowners; and eclipse our title of the #1 High Property Tax State in the nation - to a Communist NATION that just sucks the living life out of you! TRUST ME! I used to be with Goldman Sachs!
Just don’t cut the power and water off. I’ll take care of the rest.
The only thing that will save our economy now will be for goobermints, at all levels, to massively cut programs/budgets then cut taxes.
It’s during times like these that I thank GOD I’m a federal government employee.
First off and this is number 1. Stop all payments of any type to illegals and their off spring from school to free medical care to housing. Warn employers that the hiring of illegals will not be tolerated.
Second and at the same time, they can do what the rest of us do when our income drops, spend less.
What jobs are purely politically correct and bring no benefit to the community, county and state. Terminate those employees now.
I’m a City Councilman. We are having difficulties. Trust me, it’s NOT fun to have to cut positions. These are all friends and relatives, and are suddenly out of a job.
We are barely able to meet our obligations, and then along comes three floods this year, losses of income, debts due, and a situation where we have to raise taxes YET AGAIN to fulfill our obligations. Think I like it? Hell no.
You might have a bigger town with a bigger budget and more dead weight than I’m dealing with, but please have a little sympathy, k?
Well my husband is one of those local government "deadheads" and he puts in many more hours than he's paid for, maintaining networks for city communications. So if you have an emergency and need to pick up the phone to call 911, and the "deadheads" have been laid off, and the system happens to be having a down time because of it...you might wish a "deadhead" or two was on the job so you could reach the fire, EMT, or police department and their dispatchers. (BTW, cuts have already been made in salaries, no raises are planned, positions not filled at this time won't be filled, etc.)
When exactly did Government at any level become an employment haven for your friends and relatives?
I thought you existed to keep the water on, the streets paved, and the cops and firemen paid.
Actually, you’re right. That was a bit insensitive. Sorry.
I’m sure your husband is a valuable public servant. Just remember, though, if it weren’t for those of us in the private sector who tote the freight via taxes, his check wouldn’t cash.
And as far as salaries for firemen, cops, etc., that’s an old tactic of government. Whenever money gets tight, they threaten the public with cutbacks in emergency services while the tit-suckers on welfare and the real deadheads never miss a beat.
I’m too old to be fooled by that BS anymore.
Besides, I am at the point where I dread going to work there. If it wasn't such a bad high school drama club, it would be different.
I had an interview after I got off work today at a branch of an established private company. It went well and it seems like the atmosphere is brighter and they promote from within. It was something like 90% of people who rose in rank started there. The starting pay is kind of lousy but the benefits are very good. It is a better drive away from downtown and on a set of hours I like better. Those hours would work out so I could be more productive in side ventures. I am going to sleep on it and may give the guy a call to process my application.
After all said and done, I have been living on not much more and I usually have some side/freelance stuff anyway. If it weren't for my virtual tour photo gigs and stuff I find on Craigslist, I would have been wiped out a long time ago.
Some good news, granted small time. I have finally made my first payout peddling stock video at Shutterstock. It is a good feeling. The ones that got me over were some things I shot at a couple of old tractor shows. Now if something in stock photo would move, it would be great. All things take time.
When do us poor SOB's who pay for everything get any sympathy? Like Rush said today, when do we get to riot?
It’s not a coincidence that the states with the most “progressive” income tax are suffering above average problems. High income people have great variability of income from year to year. 2008 and 2009 look like reduced or no stock market gains, or commissions or bonuses. If your state depends on these high income taxpayers for half the tax take, don’t be surprised to see tax revenues drop like a rock.
This also means that the California plan of cranking up tax rates on the highest income residents won’t produce the predicted revenue until the general economy recovers. It may also be the factor that finally make that move to Nevada or another lower tax state look attractive.
States with a relatively flat tax rate will do better. Not great, but better.
If your city provides defined benefit pensions, you should look carefully at ending the costly practice of subsidized early retirement. Not all state and local governments provide heavily subsidized early retirement. Defined benefit pensions where they exist in the private sector allow early retirement but at a substantial reduction in benefits. The typical reduction is 4 to 9% per year. There is no justification for providing heavily subsidized early retirement especially outside of law enforcement. Perhaps employment levels can be sustained with curtailment of subsidized early retirement.
The point is, we've lost our way; both parties have. Our only hope is to reform the Republican party and to return it back to Constitutional ideas, but how?
Major spending reductions will be necessary at the federal level so I would not be so confident. The rats want to dramatically increase federal spending. If this situation continues to spin out of control, the rats will be forced to make substantial spending reductions. If you are not in a rat favored area, you could be vulnerable.
We pay taxes too. It’s not like the public servants are exempt from property or state tax.
I don’t buy the line about public services being phased out, but they are cut back, and workforces are thinned. Therefore response time does lessen when personnel are cut.
I thought you existed to keep the water on, the streets paved, and the cops and firemen paid.
I know I’m late but you got that right.Worked for the Gov. and it took two to do one mans job,sometimes three.
That's exactly right. That's what we're struggling to do, trying to pay our City Electric bill, keep the streets passable (they totally suck, and we have NO money to improve them), prepare for the upcoming winter maintenance( salt has doubled since last winter), etc. We have skeletal staff in all departments, and are looking for more cuts to make. We don't even have 24/7 police coverage. All departments are told to make do with maintenance, and we're under a strict departmental spending freeze. Our fire district is all volunteer.
Expenses are up, income is down, damages from the floods have to be paid up somehow.... I sure picked a lousy time to get on the board.
Luckily, Since I've been in this town, everything has been getting upgraded. WE've already done the water and sewer, the last couple of years saw a complete overhaul of our electric, our non-internet able town brought in dial-up as soon as we moved here, now we have multiple broadband providers and a new fiber-optic system coming in. So right now, with the exception of the streets, we're sitting pretty good on infrastructure.
BTW, when I say friends and relatives, I mean this is a small town, and everyone is friends and relatives and a City job is no "haven" at all.
American Republic circa 1829. (Spoils System)
BGH—it is hard for me to have sympathy.
I’ve had to do what you are doing—but in the private sector, and more than once.
Since 1982, we had to, every year, do more with less and with less people.
We had every consultant and flavor-of-the-month cost reduction guru pass our way.
One time we had a campaign to cut 40% of our expenses. So the boss of my division calls a meeting, and opens with, “So, how do we cut expenses 40%?”
Easy, says me, fire 40% of the people at this table. Problem solved.
That stupid program ended in a dismal failure to say the least—but that is what we have had to deal with.
Since 1982, American companies have had to deal with higher costs, over-regulation, and overseas competition.
Government just kept chugging along like it was 1969, getting bigger and bigger. A total disconnect from the realies faced every day by the tax paying public.
Now it’s your turn.
Welcome to the club.
Feels like crap, doesn’t it.
Every dime in money you get is first taxed away from the private sector at the point of a gun. Government doesn't create wealth. It never has and never will. Government is, at best, a necessary evil.
The first 911 call was made in 1968, the system didn't go nationwide for several years afterwards. How did they country manage to survive from 1776-1967 without all of those deadheads?
Nevada , for example , had so much excess it finally had to rebate some to us through vehicle registrations--now the worm has turned as they all started spending even more than was coming in---
I own a home in a big eastern city and also a vacation home in a rural resort area....houses are about the same size and valuation is actually higher on the rural place yet I pay 4 times as much in property taxes in town......the only difference I can see is I haul my own trash, we have a volunteer fire department, and an honest police department.
Expect speeding tickets for going one mph over the limit.
I pay taxes too. I just voted myself a damned tax increase because we HAD to. Just after a spring tax increase. We have to cover our expenses. Period. Without going into annexing everything in sight( we'd have to provide services that we cannot afford) and firing all the City employees, there's not much else left. We've moved some people into salaried positions to eliminate overtime.
I’m a City Councilwoman as well, and we too have made some tough decisions. In order to keep our mill levy at the same rate we had to freeze hiring in all our departments including police. I didn’t like that because in tough economic times, crime DOES NOT go down.
The county, and the school district WAY raised their mill, and the library district is asking voters to approve a new library. We were the only ones to hold our mill levy down.
Right there's the nut of it. Government thinks that expenses are X and that they're static. Therefore, taxes must be X to pay for them.
Those of us in the private sector don't have the luxury of seizing money from our customers at gunpoint. That would be called robbery. Government gets to do it and call it 'taxes.'
When revenues don't meet expenses, we must do what it takes to make it happen. People lose their jobs or work for less.
It has been my experience that 'most' government employee types haven't the foggiest concept of how wealth is created. To them, the money falls from the sky.
A hiring freeze! You’re lucky! At least you have been hiring! I feel like I’m in a Monty Python post.
We are VERY fortunate to have great City Administrator and Assistant. These two are the highest paid in the city, and are kicking butt and taking names. Our city has gotten grant after grant, to get improvements done for cheap or free, all due to one man. He pulled a coup in a deal where we got a FREE steel framed building, from a private business, and got it set upon a concrete pad, all in a year without a dollar spent. He’s paid his salary (some in town say exorbitant salary) multiple times a year since he’s been here. ONE dealing with the State Dept of Transportation saved us a quarter of a million dollars.
I hold this man in high regard, and his job in my hands.
And our static expenses are for services the city has voted for and expect. We provide a library which is a money hole that we're obligated to fund. We provide water, electric, sewer, trash pickup, street service, etc. All things the citizens want. And for "static" they sure did jump this year.
We're actually surveying the folks in our district to ask them if they'd prefer higher taxes or cuts in services. Our backs are against the wall. THey pay (me too) for what they want. If they want it bad enough they'll pay more. If they want to pay less, we're in a situation where we'll have to cut services.
You haven't got the memo.
Paulson says government could make a trillion dollars on this bailout.
Yeah, I think he's full of it, too.;)
Actually, he better be right. We're going to need that trillion by 2015 to bailout Medicare, Medicaid, and Social Security.
Once again you make my point. Just where the hell did that grant money come from? The money tree? It came from taxpayers. But you get to use it to buy votes and not take the political heat for raising your citizen's taxes.
And that 'free' steel building was paid for by the risk and sweat of a private business. Government didn't create it from thin air.
You are kidding us, right?
Where do you think the "grant money" came from?
And listen, in tight times, you tighten your belt and you make sacrifices. If your guy is the saint you say he is, then he loves the town and will help it through this--on a lower salary.
If not, he'll bolt when you can't pay his price.
You'll soon see what kind of great guy he really is.
The Socialist Mayor of ‘The People’s Republik of Madistan’ (WI) had a sweet, sweet deal a number of years ago...a very wealthy patron of the arts offered our city the purchase of the new multi-million dollar ‘Arts Center’ that he funded and built for us, for $1.
No, no, no! Said the Mayor. You give us a Trust Fund and we’ll just keep that in the Stock Market and we’ll all be RICH and able to fund that ‘Arts Center’ (which costs HUNDREDS of THOUSAND of dollars a YEAR just to keep the doors open) and all will be well!
That ‘everyday expenses’ money was already evaporating prior to this little ‘crash’ by the market; now it’s effectively GONE!
Meanwhile, our streets go unplowed in the winter (we had 100” of snow last winter!), pot-holes are never filled in, we’re short on cops and firemen and none of our gazillion MANDATED “green spaces” get maintained or mowed because the City can’t afford it, so they’re weedy and full of bugs and raccoons and coyotes have moved in who are tipping over our trash cans and eating our small pets!
But they could afford THIS boondoggle? (But, but, it’s for the ARTS!)
How’s that Socialism workin’ for ya now, Mayor Dave? Aren’t you PROUD of your ‘Commrads’ in Washington who did this to you, Mr. Egg on Face? LOL!
It's always been a snap getting taxes voted in when the payroll is full of friends and relatives. And where is it written that a library is 'obligated.' We also see in your post the veiled threat to lay off cops and firemen if they don't vote for the taxes.
Welcome to the world.