New York is Not Alone

New York is not the only state in fiscal crisis. You may have read about California’s problems, but did you know that the at least half of the 50 states are facing a 2011 fiscal year shortfall which adds up to $83.9 billion according to the Conference of State Legislatures? Plus, shortfalls are projected to continue through 2013 driven in part by reduction in federal medicaid payments.

The size of the deficits is astonishing in some cases with 7 states facing shortfalls in excess of 20% of their spending estimate, topped by Nevada’s 45% shortfall. As of July 1 New York was one of 9 states with a late 2010 budget.

While many states have cut expenditures, some people continue to view this is a short-term problem, one that will evaporate when the Obama stimulus finally kicks in and businesses start to hire and consumers start to spend. The problem with that scenario is that it’s more fantastic than a Walt Disney feature.

The facts are that the Obama stimulus may have prevented some private sector jobs from disappearing, but most of the money went to public sector projects like road repairs which are short-term in their impact.

Second the rest of the Obama agenda is crushing not stimulating the economy which means that businesses are not going to hire and consumer spending will not solve the problem with close to 20% of the working age population unemployed or underemployed.

In New York we are facing a structural crisis that will not be solved by a return to normality. We have allowed the public sector to grow out of control fueling long-term pension obligations that are crushing local and state government. As a result we are driving businesses and middle class people out of the state which won’t be made up for by the arrival of one chip fab plant. (The people of the Capital District who put all their eggs in that basket should have known better. All they had to do was drive past the empty GE complex to see what happens to one-company towns.)

Looking Ahead

The inevitable conflict between the public employee unions and Andrew Cuomo will be interesting to watch. In order to bring the cost of government under control, Cuomo will have to make changes that PEF, CSEA & SEIU will not be happy about. Stay tuned.

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