Barron's this weekend highlights a bit from the Levy Forecasting Center regarding the dire situations of the states and counties.
"CA, at 15% of the US GDP, with a $24 billion budget shortfall, is writing IOUs, and cutting their workweek in their own cash scramble. Levy Forecasts takes it from there:
As David and Jay Levy observe in their latest edition of the Levy Forecast, "The entire state and local government sector, representing about 15% of the economy, is starting a contraction like none other in postwar history." Citing estimates by the National Conference of State Legislatures, they reckon that the states had a combined deficit approaching $102 billon in fiscal '09 and in the new fiscal year will find themselves a cool $121 billion in the red.
And those daunting figures, the Levys sigh, do not count the multitrillion-dollar problem of unfunded future retiree benefits, nor the revenue shortfalls of local governments, including school districts. To close the gaps, states, as California illustrates, are going through conniptions, hacking away at jobs and hours worked. Such measures, the Levys point out, have sorry consequences in the overall economy, and worsen the problems of the still-towering debt load weighing down the consumer.
The bottom line is glum. "The state and local government crisis," they predict, "will worsen, scaring the municipal finance market, creating a divisive national debate on federal aid to states and shaking household confidence in hard-hit areas by forcing painful cuts in basic public services."
But, please, don't tell the cheerleaders."
If you haven't noticed the cutbacks, you might start today, starting with the 4th of July Fireworks.