Pollster.com

Lincoln's Grave Warning Realized

...a letter from President Abraham Lincoln to William F Elkins on 21 November 1864:

"I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country...corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed."

Eight Principles of Uncivilization

by Paul Kingsnorth and Dougald Hine


‘We must unhumanise our views a little, and become confident
As the rock and ocean that we were made from.’


  1. We live in a time of social, economic and ecological unravelling. All around us are signs that our whole way of living is already passing into history. We will face this reality honestly and learn how to live with it.

  2. We reject the faith which holds that the converging crises of our times can be reduced to a set of‘problems’ in need of technological or political ‘solutions’.

  3. We believe that the roots of these crises lie in the stories we have been telling ourselves. We intend to challenge the stories which underpin our civilisation: the myth of progress, the myth of human centrality, and the myth of our separation from ‘nature’. These myths are more dangerous for the fact that we have forgotten they are myths.

  4. We will reassert the role of story-telling as more than mere entertainment. It is through stories that we weave reality.

  5. Humans are not the point and purpose of the planet. Our art will begin with the attempt to step outside the human bubble. By careful attention, we will reengage with the non-human world.

  6. We will celebrate writing and art which is grounded in a sense of place and of time. Our literature has been dominated for too long by those who inhabit the cosmopolitan citadels.

  7. We will not lose ourselves in the elaboration of theories or ideologies. Our words will be elemental. We write with dirt under our fingernails.

  8. The end of the world as we know it is not the end of the world full stop. Together, we will find the hope beyond hope, the paths which lead to the unknown world ahead of us.



The Dark Mountain Manifesto

(excerpt)
Walking on lava

The end of the human race will be that it will eventually die of civilisation
Ralph Waldo Emerson

Those who witness extreme social collapse at first hand seldom describe any deep revelation about the truths of human existence. What they do mention, if asked, is their surprise at how easy it is to die.

The pattern of ordinary life, in which so much stays the same from one day to the next, disguises the fragility of its fabric. How many of our activities are made possible by the impression of stability that pattern gives? So long as it repeats, or varies steadily enough, we are able to plan for tomorrow as if all the things we rely on and don’t think about too carefully will still be there. When the pattern is broken, by civil war or natural disaster or the smaller-scale tragedies that tear at its fabric, many of those activities become impossible or meaningless, while simply meeting needs we once took for granted may occupy much of our lives.

What war correspondents and relief workers report is not only the fragility of the fabric, but the speed with which it can unravel. As we write this, no one can say with certainty where the unravelling of the financial and commercial fabric of our economies will end. Meanwhile, beyond the cities, unchecked industrial exploitation frays the material basis of life in many parts of the world, and pulls at the ecological systems which sustain it.

Precarious as this moment may be, however, an awareness of the fragility of what we call civilisation is nothing new.

‘Few men realise,’ wrote Joseph Conrad in 1896, ‘that their life, the very essence of their character, their capabilities and their audacities, are only the expression of their belief in the safety of their surroundings.’ Conrad’s writings exposed the civilisation exported by European imperialists to be little more than a comforting illusion, not only in the dark, unconquerable heart of Africa, but in the whited sepulchres of their capital cities. The inhabitants of that civilisation believed ‘blindly in the irresistible force of its institutions and its morals, in the power of its police and of its opinion,’ but their confidence could be maintained only by the seeming solidity of the crowd of like-minded believers surrounding them. Outside the walls, the wild remained as close to the surface as blood under skin, but the city-dweller was no longer equipped to face it directly.

The remainder of the essay can be read online: Dark Mountain manifesto.


Paul is the author of One No, Many Yeses and Real England. He was deputy editor of The Ecologist between 1999 and 2001. His first poetry collection, Kidland, is forthcoming from Salmon Poetry. His website is www.paulkingsnorth.net

Dougald writes the blog Changing the World (and other excuses for not getting a proper job). He is a former BBC journalist and has written for and edited various online and offline magazines. His website is www.dougald.co.uk

~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~

The "Eight principles of uncivilisation" are expanded in the Dark Mountain manifesto (also available as PDF or purchased as a limited-edition, hand-stitched pamphlet.

See the site for the blog and information about their upcoming festival May 28-30.

Several Energy Bulletin contributors are on their Blogroll, including John Michael Greer, Sharon Astyk, Rob Hopkins and Dmitry Orlov. Also mentioned are Wendell Berry and Ivan Illich.

George Monbiot recently wrote a column in the Guardian about Dark Mountain Project: I share their despair, but I'm not quite ready to climb the Dark Mountain.

On Common Dreams, Robert C. Koehler wrote a related piece: Dark Green.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Original article available here
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Our American Objectives

"Our national goals must be to rejuvenate the domestic economy; transfer the economic basis of our nation from consumptive to productive; recapitalize education and the technologies industries; achieve complete energy independence; move towards renewable energy sources;
restore public confidence in the government's ability to undertake large national infrastructure projects, and re-assert its right to set goals and policies to ensure those projects proceed smoothly; define the overarching standards for a reconstructed America including a federal review of the building and planning codes now in use, and probably the writing of new mandates that set out 21st-century standards and priorities for energy use, urban and transportation planning, and environmental design, which once put into law and accepted into general use, will be very difficult to change; commit funding for a massive 10- or 20-year program that will upgrade or replace failing components of America's infrastructure as the nation is broke (as it was in FDR's day) and this kind of spending needs to be seen as the long-term investment in our economic future that it is; restore a fair, honest, broad-based system of public contracting that will put large numbers of Americans to work on these new projects (and write the new rules in a way that ensures that the firms doing the most innovative work don't have to compete with unfair behemoth corporations like Halliburton and Lockheed for the lion's share of the funding) so that once there is a healthy, competitive construction industry that knows how to build sustainable projects—and is relying on the government to keep it in business—we will get a political constituency that will fight to ensure that the rebuilding will continue for the next several decades, regardless of what political party is in power; use the forces of globalization and information to strengthen and expand existing democratic alliances and created new ones; employ these alliances to destroy terrorist networks and establish new international security structures; lead, through our historic principles, on international cooperative efforts in spreading economic opportunity and democratic liberties, nation building, counter-prolification, and optimum environmental protection and safeguards; and cherish, honor, and protect our history and traditions of liberty and freedoms domestically particularly with respect to the Bill of Rights."

"The renewed social contract for America with its middle class and poor must:
  • Raise the minimum wage still higher and on a regular basis. It has fallen far behind increases in inflation since the 1970s, and that affects higher level wages as well.
  • Encourage living-wage programs by local governments. Governments can demand that their contractors and suppliers pay well above the minimum wage. There is substantial evidence that this does not result in an undue loss of jobs.
  • Enforce the labor laws vigilantly. Minimum-wage and maximum-hour laws are violated to a stunning degree. American workers shouldn't be forced by their employers to understate the number of hours worked or be locked in the warehouse so they can't leave on time. Workers often make only $2 and $3 an hour.
  • Unions are not seeking a free pass to organize secretly when they advocate for open check-offs on cards to approve of a union vote. They are seeking to organize without persistent and often illegal management interference. Penalties for illegally deterring such organizing are so light, it makes little sense for management not to pursue strategies to stop organizing even at the cost of prosecution.
  • Request that trading partners develop serious environmental standards and worker-protection laws. This is good for them, bringing a progressive revolution and a robust domestic market to their countries. It is good for America, which will be able to compete on a more level playing field.
  • Demand that the president, governors and mayors speak up about unconscionable executive salaries and low wages. The influence from the top cannot be underestimated. A president who looks the other way sends a strong signal to business. A president who demands responsible treatment of workers will get a response. Business does not like such attention.
  • These measures should be accompanied by serious investment in modernized infrastructure and energy alternatives, which can create millions of domestic jobs that pay good salaries. It should also be accompanied by a policy that supports a lower dollar -- contrary to Rubinomics -- in order to stimulate manufacturing exports again. Accomplishing this may require a new system of semi-fixed currencies across the globe. The unabashed high-dollar policy of the past twenty years has led to imbalances around the world that have contributed fundamentally to US overindebtedness.
  • And finally, the nation needs more balance on the part of the Federal Reserve between subduing inflation and creating jobs. Americans can live with inflation above 2 percent a year. There is no academic evidence to support a 2 percent annual target, although the Fed has made this its informal target."

The Continuing Case for The Second Bill of Rights for All American Citzens

...from Michael Lind on Salon.com on 11 January 2010 ....

The Case for Economic Rights

FDR said it and it holds 66 years later: There are benefits and opportunities every American should expect to enjoy

Three score and six years ago, the greatest president of the 20th century gave one of his greatest speeches. On Jan. 11, 1944, in a State of the Union address that deserves to be ranked with Lincoln's "Gettysburg Address" and King's "I Have a Dream" speech, President Franklin D. Roosevelt called for recognition of a "Second Bill of Rights." According to FDR:

"This Republic had its beginning, and grew to its present strength, under the protection of certain inalienable political rights -- among them the right of free speech, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty. As our nation has grown in size and stature, however -- as our industrial economy expanded -- these political rights proved inadequate to assure us equality in the pursuit of happiness."

Roosevelt did not argue that economic rights had superseded basic, old-fashioned political and civil rights. The argument of authoritarians and totalitarians that economic rights are more important than non-economic liberty was abhorrent to him. Instead, with the examples of the fascist and communist regimes of his time in mind, he argued that the purpose of economic rights was to support and reinforce, not replace, civil and political liberties:

"We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. 'Necessitous men are not free men.' People who are hungry and out of a job are the stuff of which dictatorships are made.

In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all -- regardless of station, race, or creed."

President Roosevelt was not promoting economic rights that were necessarily enforceable in court, but rather economic benefits and opportunities that every American should expect to enjoy by virtue of citizenship in our democratic republic. Many of the rights he identified have been secured by programs with bipartisan support. These include:

"the right to a good education" (the G.I. Bill, student loans, Pell Grants, Head Start, federal aid to K-12 schools) and

"the right of every family to a decent home" (federally subsidized home loans and tax breaks for home ownership). But even before the global economic crisis, the U.S. fell short when it came to full employment --

"the right to a useful and remunerative job in the industries or shops or farms or mines of the nation"

-- and a living wage --

"the right to earn enough to provide adequate food and clothing and recreation."

Roosevelt's vision was controversial at the time and is contested today. When it comes to providing a safety net for Americans, there are three distinct paradigms, which I would describe as economic citizenship, welfare corporatism and faith-based charity.

Supporters of faith-based charity among "theoconservatives" such as Marvin Olasky argue that modern social insurance like Social Security and Medicare was a mistake. The medieval British and colonial American systems of relying on religious institutions to care for the sick and poor should have been continued and built upon, with government subsidies to "faith-based institutions."

The secular business-class right, however, has shown little interest in faith-based charity, perhaps because it is difficult for rent-seeking bankers, brokers and other private sector actors to extract huge amounts of money from tax-exempt church hospitals and church soup lines. The right's preferred alternative to the progressive vision of economic citizenship is what I call "welfare corporatism." Whereas economic citizenship views protection against sickness, unemployment and old age as entitlements of citizens in a democratic republic, welfare corporatism treats these necessities of life as commodities like groceries or appliances, to be purchased in a market by people who are thought of as consumers, not citizens.

Let's contrast ideal versions of the two approaches. In the ideal America of economic citizenship, there would be a single, universal, integrated, lifelong system of economic security including

single-payer healthcare,

Social Security, unemployment payments and

family leave

paid for by a single contributory payroll tax (which could be made progressive in various ways or reduced by combination with other revenue streams). Funding for all programs would be entirely nationalized, although states could play a role in administration. There would still be supplementary private markets in health and retirement products and services for the affluent, but most middle-class Americans would continue to rely primarily on the simple, user-friendly public system of economic security. As Steven Attewell points out, the Social Security Act of 1935 was intended not merely to provide public pensions for the elderly but to establish a framework for a comprehensive system of social insurance corresponding to President Roosevelt's "right to adequate protection from the economic fears of old age, sickness, accident, and unemployment." Attewell writes: "We need to go back to the original drawing board -- the Social Security Act of 1935 -- to finish the job it began and create a truly universal and comprehensive social welfare state."

In the utopia of welfare corporatism, today's public benefits -- Social Security, Medicare, unemployment insurance and, in a few states, public family leave programs -- would be abolished and replaced by harebrained schemes dreamed up by libertarian ideologues at corporate-funded think tanks like the Cato Institute and the Heritage Foundation. Tax subsidies would be funneled to insurance companies, brokers and banks. Social Security would be replaced by a bewildering miscellany of tax-favored personal savings accounts. Medicare would be replaced by a dog's breakfast of tax subsidies for purchasing health insurance and personal medical savings accounts. Unemployment insurance would give way to yet another Rube Goldberg scheme of tax-favored unemployment insurance accounts. As for family leave -- well, if you're not wealthy enough to pay out of pocket for a nanny for your child or a nurse for your parent, you're out of luck.

The strongest case for economic citizenship instead of welfare corporatism is economic. Economic citizenship is more efficient and cheaper in the long run, because the government need only meet costs, while subsidized private providers must make a profit. The Democratic and Republican supporters of welfare corporatism justify their system of massive subsidies for for-profit healthcare and retirement security with the claim that market competition will keep down prices. If only that were true. Competitive markets are probably impossible to create, in the highly regulated insurance sector and the highly concentrated financial sector that sells private retirement goods and services.

It follows that a policy of subsidizing oligopolies and monopolies, via government subsidies to consumers, in the absence of government-imposed price controls, is a recipe for cost inflation, as the providers jack up their prices, sending the consumers back to Congress to demand even more public subsidies. By its very nature, welfare corporatism funnels public resources, in the form of tax breaks, to rent-seeking, predatory firms in the FIRE (finance, insurance, real estate) sector, with ever-swelling dead-weight costs on the economy. Welfare corporatism equals corporate welfare.

Unfortunately, most progressives have failed to make the case against the libertarian myth of market competition in the provision of social insurance. All too many, including President Obama, have made the too-clever-by-half argument that the public option would keep prices down by means of market competition. In other words, the center-left has borrowed a bogus argument about competition from right-wing free-market fundamentalism in order to defend a token public program that ceased to be of any interest once Obama and the Democrats in Congress ruled that Americans with employer-provided insurance would be banned from joining the public option. When you're reduced to parroting the opposition's erroneous theories, in the process of begging for a slight modification of the opposition's pet program, you clearly don't have the nerve or the patience to play the long game in politics.

In a response to one of my earlier columns, Will Marshall wonders how I can dare to criticize the legacy of Bill Clinton, a Democrat. My reasons should be clear by now. I am not a partisan Democratic operative focused on winning the next election. I am interested only in strengthening the republic through a gradual expansion of economic citizenship in the tradition of Franklin Roosevelt's Second Bill of Rights. If this means criticizing Democratic presidents who expand welfare corporatism instead of economic citizenship, so be it.

As part of his opportunistic policy of triangulation between his own party and the opposition, Bill Clinton joined the Republicans in a three-pronged assault on New Deal economic citizenship. He and the Republican Congress abolished Aid to Families With Dependent Children, a flawed and unpopular means-tested program for the poor that should have been reformed as a national program rather than turned over to the states as the neo-Confederate right insisted. Instead of piecemeal expansion of single-payer healthcare, Clinton pushed a version of employer-based welfare corporatism plus subsidies that came out of the playbook of moderate Republicans like Nixon. And we now know that Clinton secretly agreed to support Newt Gingrich's drive to partly privatize Social Security, in return for dedicating the federal government's imaginary future surpluses to what was left of Social Security. In 2005, Will Marshall argued in favor of private accounts, on the grounds that they would soften up Americans for cuts in Social Security: "If today's workers start saving and investing more in stocks and bonds, the returns they earn would allow us to trim their Social Security benefits later, without reducing their overall standard of living."

While George W. Bush pushed for partial privatization of Social Security, he failed because of massive public opposition. But Bush and the Republican majority in Congress succeeded in enacting the Social Security drug benefit, a flawed but genuine expansion of economic citizenship. Clinton is the only president to have successfully supported the destruction of a New Deal entitlement, while Bush presided over the greatest expansion of the Rooseveltian entitlement system since Lyndon Johnson passed Medicare.

For his part, Barack Obama, like Bill Clinton, rejected single-payer in favor of a moderately conservative welfare corporatist approach to healthcare reform. In contrast, Obama's proposal for student loan reform, an idea discussed in the Clinton years, would move in the right direction, away from welfare corporatism and toward economic citizenship, by replacing subsidized third-party lenders with direct government provision of student loans to needy college students.

Parties are coalitions of interest groups, they are not public philosophies, and presidents, great and minor, are and have to be opportunists. In contrast, reformers only have a chance of succeeding if they stick to their basic principles and keep their eyes on the prize. Progressives should support any politician, Democrat or Republican, who expands economic citizenship to the detriment of welfare corporatism, and they should oppose any politician, Democrat or Republican, who expands welfare corporatism to the detriment of economic citizenship.

Any more questions?

Monetary Cost of Iraq War

17 February 2009

State Budgets in Crisis across Nation

...From Elizabeth Nichol and Iris J. Lay for the Center on Budget and Policy Priorities website on Wednesday 10 February '09...

STATE BUDGET TROUBLES WORSEN

By Elizabeth McNichol and Iris J. Lav

States are facing a great fiscal crisis. At least 46 states faced or are facing shortfalls in their budgets for this and/or next year, and severe fiscal problems are highly likely to continue into the following year as well. Combined budget gaps for the remainder of this fiscal year and state fiscal years 2010 and 2011 are estimated to total more than $350 billion.

The four states that have withstood the financial storm so far are Montana, North Dakota, West Virginia, and Wyoming -- all states that have coal production as a major part of their economy.

States are currently at the mid-point of fiscal year 2009 — which started July 1 in most states — and are in the process of preparing their budgets for the next year. Over half the states had already cut spending, used reserves, or raised revenues in order to adopt a balanced budget for the current fiscal year — which started July 1 in most states.

Now, their budgets have fallen out of balance again. New gaps of $51 billion (over 10% of state budgets) have opened up in the budgets of at least 42 states plus the District of Columbia. These budget gaps are in addition to the $48 billion shortfalls that these and other states faced as they adopted their budgets for the current fiscal year, bringing total gaps for the year to 15 percent of budgets.

The states fiscal problems are continuing into the next two years. At least 45 states have looked ahead and anticipate deficits for fiscal year 2010 and beyond. These gaps total almost $94 billion — 16 percent of budgets — for the 36 states that have estimated the size of these gaps and are likely to grow as gaps are re-estimated in the next few months.

Figure 2 shows the size and duration of the deficits in the recession that occurred in the first part of this decade, and estimates of the likely deficits this time. This recession is more severe — deeper and longer — than the last recession, and thus state fiscal problems are likely to be worse.

Unemployment, which peaked after the last recession at 6.3 percent, has already hit 7.6 percent, and many economists expect it to rise to 9 percent or higher, which will reduce state income taxes and increase demand for Medicaid and other services. With consumers’ reduced access to home equity loans and other sources of credit, sales taxes are also likely to fall more steeply than they did in the last recession.

These factors suggest that state budget gaps will be significantly larger than in the last recession. Based on past experience and the depth of this recession, it appears likely that all but a handful of states will face shortfalls in fiscal year 2010 and these deficits will end up totaling about $145 billion.

If, as is widely expected, the economy does not begin to significantly recover until the end of calendar year 2009, state deficits are likely to be even larger in state fiscal year 2011 (which begins in July 2010 in most states).[1] The deficits over the next two-and-a half years are likely to be in the $350 billion to $370 billion range.[2]

It may be particularly difficult for states to recover from the current fiscal situation. Housing markets may be slow to fully recover; the decline in housing markets has already depressed consumption and sales taxes as people refrain from buying furniture, appliances, construction materials, and the like.

Property tax revenues are also affected, and local governments will be looking to states to help address the squeeze on local and education budgets. And as the employment situation continues to deteriorate, income tax revenues will weaken further and there will be further downward pressure on sales tax revenues as consumers are reluctant or unable to spend.

The vast majority of states cannot run a deficit or borrow to cover their operating expenditures.

As a result, states have three primary actions they can take during a fiscal crisis: they can draw down available reserves, they can cut expenditures, or they can raise taxes. States already have begun drawing down reserves; the remaining reserves are not sufficient to allow states to weather a significant downturn or recession.

The other alternatives — spending cuts and tax increases — can
further slow a state’s economy during a downturn and contribute to the further slowing of the national economy, as well.

MOUNTAIN STATES REGION in BOLD RED


TABLE 1: STATES WITH MID-YEAR FY2009 BUDGET GAPS

Size of Gap

Percent of FY2009 General Fund

Alabama
$1.1 billion
12.7%

Alaska
$360 million
6.8%

Arizona
$1.6 billion
15.9%

California
$13.7 billion
13.6%

Colorado
$604 million
7.7%

Connecticut
$1.7 billion
10.1%

District of Columbia
$258 million
4.1%

Delaware
$226 million
6.2%

Florida
$2.3 billion
9.0%

Georgia
$2.2 billion
10.3%

Hawaii
$232 million
4.0%

Idaho
$218 million
7.4%

Illinois
$4.2 billion
14.8%

Indiana
$1.1 billion
8.0%

Iowa
$134 million
2.1%

Kansas
$186 million
2.9%

Kentucky
$456 million
4.9%

Louisiana
$341 million
3.7%

Maine
$140 million
4.6%

Maryland
$691 million
4.6%

Massachusetts
$2.4 billion
8.4%

Michigan
$200 million
0.9%

Minnesota
$426 million
2.5%

Mississippi
$175 million
3.4%

Missouri
$342 million
3.8%

Nevada
$536 million
7.3%

New Hampshire
$50 million
1.6%

New Jersey
$2.1 billion
6.5%

New Mexico
$454 million
7.5%

New York
$1.7 billion
3.0%

North Carolina
$2.0 billion
9.3%

Ohio
$1.2 billion
4.2%

Oregon
$442 million
6.6%

Pennsylvania
$2.3 billion
8.1%

Rhode Island
$372 million
11.4%

South Carolina
$871 million
12.7%

South Dakota
$27 million
2.2%

Tennessee
$884 million
7.8%

Utah
$620 million
10.4%

Vermont
$66 million
5.4%

Virginia
$1.1 billion
6.7%

Washington
$509 million
3.4%

Wisconsin
$594 million
4.2%

TOTAL
$51.1 billion
10.5%

Note: An entry of “DK” in Size of Gap means that an estimate of the size of the projected gap in that state is not yet available.

TABLE 2: STATES WITH PROJECTED FY2010 BUDGET GAPS

Size of Gap
Percent of FY2009 General Fund

Alabama
DK

Arizona
$3.0 billion
29.8%

Arkansas
$146 million
3.2%

California
$25.9 billion
25.6%

Colorado
$386 million
4.9%

Connecticut
$4.0 billion
23.1%

Delaware
$557 million
15.3%

Florida
$5.8 billion
22.6%

Georgia
$1.6 billion
7.5%

Hawaii
$682 million
11.9%

Idaho
$411 million
13.9%

Illinois
DK

Iowa
$779 million
12.2%

Kansas
$1.1 billion
16.7%

Kentucky
DK

Louisiana
$2.0 billion
21.7%

Maine
$177 million
5.8%

Maryland
$1.9 billion
12.5%

Massachusetts
$3.1 billion
11.0%

Michigan
$1.6 billion
6.9%

Minnesota
$2.5 billion
14.7%

Mississippi
$87 million
1.7%

Missouri
DK

Nebraska
$152 million
4.3%

Nevada
$1.1 billion
30%

New Jersey
$4.0 billion
12.3%

New Mexico
DK

New York
$13.7 billion
24.3%

North Carolina
$3.3 billion
15.3%

Ohio
$2.0 billion
7.1%

Oklahoma
$310 million
4.7%

Oregon
DK

Pennsylvania
DK

Rhode Island
$450 million
13.7%

South Carolina
$535 million
7.8%

South Dakota
$32 million
2.7%

Tennessee
$712 million
6.3%

Texas
$3.5 billion
7.6%

Utah
$721 million
12.1%

Vermont
$253 million
20.8%

Virginia
$1.8 billion
10.4%

Washington
$2.8 billion
18.2%

Wisconsin
$2.9 billion
20.3%

TOTAL
$93.5 billion
15.9%

Note: An entry of “DK” in Size of Gap means that an estimate of the size of the projected gap in that state is not yet available.

Major State Fiscal Organizations Find State Fiscal Crisis of Historic Proportions That Will Last for a Number of Years

The three main organizations that track state fiscal conditions — the National Conference of State Legislatures, the National Association of State Budget Officers and the Center on Budget and Policy Priorities — have found large and growing shortfalls in the vast majority of states.

There may be some confusion, however, about the ways in which these deficit estimates differ and whether they are in conflict. The Center has projected that states will face deficits of some $350 billion over the next 30 months, which appears to be very different than the $90 billion to $100 billion deficits being discussed by NCSL and NASBO.

The differences, however, can be simply explained by two factors:

The freshness of the data. The Center’s estimate reflects the most current data on deficits that each state has released. Two frequently-cited NCSL and NASBO reports reflect data collected in November 2008. The economy has deteriorated substantially since November, and states have revised their revenue estimates downward since then. Estimates of current deficits in an updated survey released by NCSL at the end of January are essentially the same as the Center’s January estimates.

Projections into FY 2011.

The Center’s estimate includes shortfalls that have already been announced plus a projection of the additional deficits states will experience through fiscal year 2011; this projection is based on the relationship of revenues to economic conditions. The NCSL and NASBO are reporting solely on deficits states have announced so far for mid-year fiscal year 2009 and for fiscal year 2010.

NCSL and NASBO are not attempting to estimate the totality of states’ deficits over the course of the expected fiscal crisis, although analysts at both organizations acknowledge that the fiscal crisis is likely to last for several years.

Despite the different timing and scope of the estimates, the three organizations are finding the same thing. Each of these surveys clearly indicates that states are facing a fiscal crisis of historic proportions that will continue for number of years.

Some states have not been affected by the economic downturn but the number is dwindling.

There are a number of reasons why. Some mineral-rich states — such as New Mexico, Alaska, and Montana — saw revenue growth as a result of high oil prices. However, the recent decline in oil prices has begun to affect revenues in some of these states. The economies of a handful of other states have so far been less affected by the national economic problems.

In states facing budget gaps, the consequences sometimes are severe — for residents as well as the economy.

Unlike the federal government, states cannot run deficits when the economy turns down; they must cut expenditures, raise taxes, or draw down reserve funds to balance their budgets. As the current fiscal year ends and states plan for next year, budget difficulties are leading some 40 states to reduce or propose reductions in services to their residents, including some of their most vulnerable families and individuals.[3]

For example, at least 28 states have implemented or are considering cuts that will affect low-income children’s or families’ eligibility for health insurance or reduce their access to health care services.

Programs for the elderly and disabled are also being cut. At least 22 states and the District of Columbia are cutting medical, rehabilitative, home care, or other services needed by low-income people who are elderly or have disabilities, or significantly increasing the cost of these services.

At least 26 states are cutting or proposing to cut K-12 and early education; several of them are also reducing access to child care and early education, and at least 32 states have implemented or proposed cuts to public colleges and universities.

In addition, at least 38 states and the District of Columbia have proposed or implemented cuts affecting their state workforce. Workforce cuts often result in reduced access to services residents need. They also add to states’ woes by contracting the state economy.

If revenue declines persist as expected in many states, additional budget cuts are likely. Budget cuts often are more severe in the second year of a state fiscal crisis, after reserves have been largely depleted and thus are no longer an option for closing deficits.

The experience of the last recession is instructive as to what kinds of actions states may take. Between 2002 and 2004 states reduced services significantly. For example, in the last recession, some 34 states cut eligibility for public health programs, causing well over 1 million people to lose health coverage, and at least 23 states cut eligibility for child care subsidies or otherwise limited access to child care.

In addition, 34 states cut real per-pupil aid to school districts for K-12 education between 2002 and 2004, resulting in higher fees for textbooks and courses, shorter school days, fewer personnel, and reduced transportation.

Expenditure cuts and tax increases are problematic policies during an economic downturn because they reduce overall demand and can make the downturn deeper. When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals.

In all of these circumstances, the companies and organizations that would have received government payments have less money to spend on salaries and supplies, and individuals who would have received salaries or benefits have less money for consumption. This directly removes demand from the economy. Tax increases also remove demand from the economy by reducing the amount of money people have to spend.

The federal government — which can run deficits — can provide assistance to states and localities to avert these “pro-cyclical” actions.

States Have Restrained Spending and Accumulated Rainy Day Funds

Many states have never fully recovered from the fiscal crisis in the early part of the decade.

This fact heightens the potential impact on public services of the deficits states are now projecting.

State expenditures fell sharply relative to the economy during the 2001 recession, and for all states combined they remain below the FY2001 level. In 18 states, general fund spending for FY2008 — six years into the economic recovery — remained below pre-recession levels as a share of the gross domestic product.

In a number of states the reductions made during the downturn in education, higher education, health coverage, and child care remain in effect. These important public services were suffering even as states turned to budget cuts to close the new budget gaps. Spending as a share of the economy declined in FY2008 and is projected to decline further in FY2009.

One way states can avoid making deep reductions in services during a recession is to build up rainy day funds and other reserves. At the end of FY2006, state reserves — general fund balances and rainy day funds — totaled 11.5 percent of annual state spending. Reserves can be particularly important to help states adjust in the early months of a fiscal crisis, but generally are not sufficient to avert the need for substantial budget cuts or tax increases.

In this recession, states have already drawn down much of their available reserves; the available reserves in states with deficits are likely to be depleted in the near future.

Federal Assistance Needed

Federal assistance can lessen the extent to which states take pro-cyclical actions that can further harm the economy.

In the recession in the early part of this decade, the federal government provided fiscal relief in a package enacted in 2003. There were two types of assistance to states: 1) a temporary increase in the federal share of the Medicaid program; and 2) general grants to states, based on population.

The increased Medicaid match averted even deeper cuts in public health insurance than actually occurred, while the general grants helped prevent cuts in a wide variety of other critical services. The major problem with that assistance was that it was enacted many months after the beginning of the recession, so it was less effective than it could have been in preventing state actions that deepened the economic downturn.

The federal government should consider aiding states now, rather than waiting until the downturn is nearly over, and providing enough fiscal assistance to avert a majority of the budget cuts states would otherwise make.

TABLE 3: SIZE OF TOTAL FY2009 BUDGET GAPS

Gap before budget was adopted

Additional mid-year gap

Total

Total Gap as Percent of FY2009 General Fund

Alabama
$784 million
$1.1 billion
$1.8 billion
22.2%

Alaska
$360 million
$360 million
6.8%

Arizona #
1.9 billion
$1.6 billion
$3.5 billion
34.8%

Arkansas
$107 million
?
$107 million
2.4%

California
$22.2 billion
$13.7 billion
$35.9 billion
35.5%

Colorado
$604 million
$604 million
7.7%

Connecticut
$150 million
$1.7 billion
$1.9 billion
11.0%

Delaware
$217 million
$226 million
$443 million
12.2%

District of Columbia
$96 million
$258 million
$354 million
5.6%

Florida
$3.4 billion
$2.3 billion
$5.7 billion
22.2%

Georgia #
$245 million
$2.2 billion
$2.4 billion
11.5%

Hawaii
$232 million
$232 million
4.0%

Idaho
$217 million
$131 million
7.4%

Illinois
$1.8 billion
$4.2 billion
$8.0 billion
21.1%

Indiana
$1.1 billion
$1.1 billion
8.0%

Iowa
$350 million
$134 million
$484 million
7.6%

Kansas
$185 million
$185 million
2.9%

Kentucky
$266 million
$456 million
$722 million
7.8%

Louisiana
$341 million
$341 million
3.7%

Maine
$124 million
$140 million
$265 million
8.6%

Maryland
$808 million
$691 million
$1.5 billion
10.0%

Massachusetts
$1.2 billion
$2.4 billion
$3.6 billion
12.7%

Michigan
$472 million
$200 million
$672 million
2.9%

Minnesota
$935 million
$426 million
$ 1.4 billion
7.9%

Mississippi #
$90 million
$175 million
$265 million
5.2%

Missouri
$342 million
$342 million
3.8%

Nevada
$898 million
$536 million
$1.4 billion
19.6%

New Hampshire
$200 million
$50 million
$250 million
8.0%

New Jersey #
$2.5 billion
$2.1 billion
$4.6 billion
14.2%

New Mexico
$454 million
$454 million
7.5%

New York
$4.9 billion
$1.7 billion
$6.4 billion
11.7%

North Carolina
$2.0 billion
$2.0 billion
9.3%

Ohio #
$733 million
$1.2 billion
$1.9 billion
6.8%

Oklahoma
$114 million
$114 million
1.7%

Oregon
$442 million
$442 million
6.6%

Pennsylvania
$2.3 billion
$2.3 billion
8.1%

Rhode Island
$430 million
$372 million
$802 million
24.5%

South Carolina
$250 million
$871 million
$1.1 billion
16.3%

South Dakota
$27 million
$27 million
2.2%

Tennessee #
$468 million
$884 million
$1.4 billion
12.0%

Utah
$620 million
$620 million
10.4%

Vermont
$59 million
$66 million
$125 million
10.3%

Virginia
$1.2 billion
$1.1 billion
$2.3 billion
13.8%

Washington
$509 million
$509 million
3.4%

Wisconsin
$652 million
$594 million
$1.2 billion
8.8%

TOTAL
$47.6 billion
$51.1 billion
$98.6 billion
14.9%

# - Only the low end of the estimated FY09 gap for these states — ones that provided a range of estimates — is shown in this table.

For more detail see 29 States Faced Total Budget Shortfall of At Least $48 billion in 2009 available at http://www.cbpp.org/1-15-08sfp.htm.

TABLE 4: SOURCE OF MID-YEAR FY2009 & FY2010 GAP ESTIMATES

State
Source

Alabama
Legislative Fiscal Office

Alaska
Legislative Finance Division Overview of proposed budget

Arizona
Joint Legislative Budget Committee and Financial Advisory Committee

Arkansas
Governor’s proposed budget

California
Governor’s proposed budget

Colorado
Legislative Council

Connecticut
Office of Fiscal Analysis

Delaware
Governor’s proposed budget

District of Columbia
Chief Financial Officer

Florida
Revised revenue projections

Georgia
Governor’s proposed budget

Hawaii
Council on Revenue forecast

Idaho
Governor’s proposed budget

Illinois
State Comptroller

Indiana
Budget Director

Iowa
Fiscal Services Division

Kansas
Legislative Research Department

Kentucky
State budget director

Louisiana
Revenue Estimating Conference /Commissioner of Administration

Maine
Revenue Forecasting Committee

Maryland
Legislature’s projection

Massachusetts
Massachusetts Budget and Policy Center

Michigan
Consensus Revenue Forecast

Minnesota
Management and Budget forecast

Missouri
Governor-elect’s office

Mississippi
Governor’s proposed budget

Nebraska
Tax Rate Review Committee

Nevada
Board of Examiners

New Hampshire
Budget Director

New Jersey
Governor’s office(FY09)/ New Jersey Policy Perspectives(FY10)

New Mexico
Revised revenue projections

New York
Division of Budget

North Carolina
North Carolina Budget and Tax Center

Ohio
Office of Budget and Management

Oklahoma
Press reports of Office of State Finance projections

Oregon
November revenue re-estimate shortfall plus $300 million based on State Economist’s estimate of additional revenue shortfall of $300 million to $600 million

Pennsylvania
Governor’s office

Rhode Island
House Finance Office

South Carolina
State Budget and Control Board

South Dakota
Governor’s proposed budget

Tennessee
Press reports of State Funding Board meeting

Texas
Center on Public Policy Priorities analysis of Legislative Budget Board, Comptroller and HHS
Commission data.

Utah
Governor’s proposed budget

Vermont
Governor’s proposed budget

Virginia
Governor’s office

Washington
Legislature’s projections (FY10 is half of biennial estimate.)

Wisconsin
Legislative Fiscal Bureau

For source information for the original shortfall estimates, see 29 States Faced Total Budget Shortfall of At Least $48 billion in 2009 available at http://www.cbpp.org/1-15-08sfp.htm.

End Notes:

[1] The projected budget shortfalls do not account for the effects of major economic recovery legislation. If states receive fiscal aid, these shortfalls would be smaller. In addition if economic growth was significantly better than projected next year as a result of stimulus efforts, state revenue collections would likely be higher than projected — although it is difficult to know when that effect would first be felt.

[2] The deficits over the next two-and-a-half years are likely to be in the $350 billion to $370 billion range.

[3] For more detailed information see Facing Deficits, Many States are Imposing Cuts that Hurt Vulnerable Residents http://www.cbpp.org/3-13-08sfp.htm.

Document Resources:

PDF of full report (10pp.)

STATE FISCAL STRESS DEEPENS

Some 46 states are facing fiscal stress in their FY2009 and/or FY2010 budgets.

New mid-year fiscal year 2009 shortfalls of $51 billion have opened up in the budgets of at least 42 states and the District of Columbia.

Budget deficits are already projected in 43 states for the upcoming fiscal year. Initial estimates of these shortfalls total almost $94 billion. As the full extent of 2010 deficits become known, shortfalls are likely to equal $145 billion.

Combined budget gaps for the remainder of this fiscal year and state fiscal years 2010 and 2011 are estimated to total $350 billion to $370 billion.

*

Ugly numbers indeed across the nation that only further forebode an increasing intensity to the economic collapse over the next few years. It is difficult to imagine what it will take to reverse, let alone stop this economic catastrophe in state and local governments.

Montana and Wyoming have been able to avoid the economic perfect storm thus far, but it would seem reasonable their economic invincibility is only temporary. Most recent news from this writer's current temporary city of residence indicates just that.

*****
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