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 ...
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.
Jack
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.
Well put.
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.
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