"[t]he state’s economic and revenue outlook continues to deteriorate. Even in the few weeks since the budget was signed, there have been a series of negative developments. Our updated revenue forecast projects that revenues will fall short of the assumptions in the budget package by $8 billion."
$8 billion!!!
But the state just passed a budget that dealt with these shortfalls, right?
"[t]he Legislature and Governor will need to adopt billions of dollars in additional solutions in the coming months to bring the 2009–10 budget back into balance. Moreover, a number of the adopted solutions—revenue increases and spending reductions—are of a short–term duration. Thus, without corrective actions, the state’s huge operating shortfalls will reappear in future years—growing from $12.6 billion in 2010–11 to $26 billion in 2013–14."
D'oh!
Also, let's not forget that the budget that was passed is contingent on a May special election where the voters will vote on several of the budgetary tricks used by the legislature to balance the budget; namely through creative borrowing from various programs. If those propositions fail (and I think at least one of them might), then it's back to the drawing board for the legislature and the Governor. However, the LAO did offer some advice- "While seeking to offset 2009–10 General Fund costs is the most immediate concern for the use of federal funds, the Legislature should also seek to preserve as many federal dollars as possible to help balance the budget in future years—as opposed to committing them now for augmentations."
What's that you say? We should use federal "stimulus" funds to balance the budget and not spend them on specific programs as demanded of us by the Federal government? Why shouldn't a state be able to, say, use the stimulus money to help balance their own budget? South Carolina Gov. Mark Sanford is preparing to ask the Administration that South Carolina be allowed to spend some of the stimulus money in other ways than as directed by the Federal government. The states most definitely should be allowed lee-way in spending this money in ways it sees fit, I mean, I am of the belief that the Federal government should just have given states a lump-sum of money based on population and let them spend it as they saw fit. Plus, states aren't allowed to run deficits, unlike the Federal government, so if they are forced to expand certain government programs in order to receive Federal funds, once the Federal funds are gone, their gone, and the states are left to fill the missing obligation.
There's an amusing story out of L.A. in regards to transportation-related stimulus funding. Apparently, the L.A. County transit authority is to receive $215 million in transportation funds and was going to split it up amongst the 88 cities in the county. However, many of the cities otherwise don't qualify for receiving funds for transportation because they are either too small or don't have qualifying transportation projects. So, some cities would be getting money to spend on transportation projects that aren't being built in their city; instead, the agency initially recommended that they swap transportation funds with other cities and use that money on other projects, according to that city's needs. As the City Manager of Irwindale, which does not have eligible transportation projects, put it, "we probably would have used it to avoid people getting laid off." But the transit agency clarified their position and said that all money must be used for transportation purposes. What's a city going to do with money for transportation projects when they don't have any qualifying transportation projects to begin with? I suppose they could just create a new project out of the blue solely for the purpose of not losing this funding- I don't think that's how government is supposed to operate.
Back to the LAO. Additionally, the LAO says-
"Our current economic forecast projects a recovery beginning in the first quarter of 2010. Over the next five years, however, our forecast projects relatively slow growth compared to past recoveries. In our view, weakness in the finance, housing, and export markets are likely to keep the national economy from expanding at rates that typically occur after a recession. While our forecast is similar to the economic outlook shared by many economists, some see recovery taking even more time."
Why you don't say. Recovery won't start until next year and will likely be slow? Furthermore, the LAO says that employment won't likely begin to increase again until 2011. Wait, 2011. . .Hey, that's when Obama's tax increases are supposed to take effect, along with a whole slew of other new government spending programs and regulatory regimes, like cap and trade. And that's supposed to be his second year of 4.5% growth in the economy. Raising taxes, increasing government burden upon businesses and individuals- hey, that's just what a recovering economy needs, more hurdles. And a barely recovering economy at that.
Yes, I realize that there's an abundance of sarcasm, but sometimes, it just has to come out.
Oh, I forgot to include a link to this story about how an increasing number of banks are looking at returning funds it received from the government due to the number of restrictions and requirements placed upon those banks in order to receive the funds. Specifically, there are requirements upon these banks to further certain social and economic goals of this Administration, like allowing people to re-negotiate their mortgages, put those banks into weaker positions- that is, the bank renegotiates a mortgage based on a lower value when the owner has already lost their equity. These policies simply force a bank to replace one bad mortgage with a worse one, from their extent; but since they continue to receive federal funds, they are able to remain in operation. As one of the people interviewed for that story put it, "keeping insolvent banks in operation does not benefit the system."
All of this is to say that there is finally a reaction to these policies put forth by the Administration to consolidate control at the federal level. The carrot of federal funding in return for increased federal oversight is becoming less and less appetizing.
No comments:
Post a Comment