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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Not Just In California

The California budget crisis has gotten a lot of deserved attention over the last few weeks, leading to all sorts of theories, some bordering on collective psychotherapy, about the Golden State’s fiscal dysfunction.
But it doesn’t seem to have quite penetrated the consciousness of the chattering classes that California’s only an extreme example of a fiscal meltdown that’s occurring all over the country, and probably isn’t getting any better any time soon.
New figures published last week by the Center for Budget and Policy Priorities paint the full bleak picture. For fiscal year 2010 (which began on July 1), states faced cumulative shortfalls during their budgeting processes of $162 billion, which amounts to 29.3 percent of state budgets. That’s significantly more than the $111 billion in shortfalls the states had in FY 2009, when the financial crisis hit.
But if current trends hold, states are expected to encounter an even higher level of shortfalls–$180 billion–in Fiscal Year 2011, for which they are just beginning to make plans. They are far past the ability to borrow from reserve funds, cancel major new investments, or cut out “waste.” We’re talking serious cuts in services and employment, and the kind of tax increases that no one likes and that could combine with spending cuts to further depress state and even national economies. And it would all be a lot, lot worse if funding for the states (albeit primarily just for Medicaid) hadn’t been included in the economic stimulus package.
So mock California all you want: as is often the case, they really have been a trend-setter in the advent of unmanageable fiscal problems.

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