Study: Nine states risking California-style 'fiscal peril'

If misery loves company, the Pew Center on the States public policy think-tank has some comforting words for Californians: Though our fiscal problems "are in a league of their own . . . some of the same factors driving California toward the brink of insolvency also are hurting an array of other states."

Do you feel better already?

A new study from the non-partisan Pew -- "Beyond California: States in Fiscal Peril" -- looks at nine states that the organization asserts aren’t far behind the Golden State in suffering havoc from the Great Recession. The nine, alphabetically: Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin.

The Pew scored all 50 states based on six factors that "contributed substantially to California’s ongoing fiscal woes": high foreclosure rates; increasing joblessness; loss of state revenues; the relative size of budget gaps; legal obstacles to balanced budgets (specifically, a supermajority requirement for some or all tax increases or budget bills); and poor money-management practices.

California, of course, scored worst of all, but it was closely followed by Arizona, Rhode Island and Michigan, in that order.

Considering that Arizona and Nevada, in particular, might be expected to benefit as business refuges from California’s nightmare, here’s what the Pew study has to say about those two states:

--- Arizona: "As the economic news grew bleaker and state revenues sank during the past two years, Arizona’s lawmakers relied on one-time fixes to balance its budget instead of making long-term changes. In part, they were hamstrung by voter-imposed spending constraints, a tax structure highly reliant on a growing economy and a series of tax cuts, made in the 1990s, that has limited revenue. At this writing, policy makers still had not decided how to bridge a $1 billion gap in the current fiscal year’s budget."

--- Nevada: "Nevada’s unique gaming-based economy is in jeopardy, as its state budget relies on gambling and sales taxes to provide 60% of its revenues. Year-over-year revenue has fallen for two consecutive years, a record. But changes to the tax system are difficult to make because, unlike most states, Nevada has written some of its tax laws into the state constitution. So increasing the sales tax or adding an income tax, for example, would be nearly impossible because it requires voters to amend the constitution."

And what did Wisconsin, California’s dairy rival, do wrong to get on the Troubled-10 list?

"The recession has hit Wisconsin harder than most state governments, especially when it comes to lost tax revenues and the size of the hole in its budget," the Pew study says. "Wisconsin’s history of budget shortfalls and pattern of borrowing frequently to cover operating expenses, among other measures, made it poorly positioned to weather the most recent severe economic downturn."

At the opposite end of the spectrum, Wyoming scored best in the Pew study, followed by Iowa and Nebraska (tied for second place) and Montana, North Dakota and Texas (tied for third).

Are the Great Plains states the economic future of America?

-- Tom Petruno

Comments

[Paul]

Here in New York, our governor has been spreading gloom and doom and predicting fiscal Armageddon, but we aren't among the basket cases listed in the article.
A politician who is less than honest - gee, you think?

[Schigolch]

It seems that it's really about raising taxes. The state welfare apparatus does not contract under any circumstances. Therefore, it's either raise taxes or suffer a budget gap.

[Sara Mc]

Ahhh.. I see that Illinois made the list, the land of Obama. Come on now, with all that "Obama Money" floating around you would think he would have sprinkled a little on his own home state right??

And to think of all the Chicago politicians we have swarming around the White House right now... hmmm, I doubt they would bring that same corruption to the federal level right?? Doubt it.

[Gus]

It's so sad that California is in a hole and falling deeper, with no foreseeable way out. Yet our elected officials do nothing except squabble. And the population doesn't seem to care so long as taxes aren't raised and union/public employee benefits aren't cut, which of course means we borrow more and dig ourselves deeper into a hole. I love this state, but it doesn't surprise me at all why people leave.

[Rich McKone]

The budget deficit and $130 billion in bond debt can't be that big of a deal or the politicians would take advantage of easy opportinities to save a few billion, wouldn't they?

The State could save $250 to $350 million annually by contracting with counties for parole supervision with local courts dealing with parole violations. The 3,700 prison bed shortage could be eliminated by obtaining more contract beds, each of which saves about $30,000 annually in operating costs. Adding 3,700 contract beds would save in excess of $110 million annually.

These two actions would also avoid construction of 10,400 prison beds, saving from $1 billion to $3 billion in prison construction costs, depending on which prison construction estimates are applied.

[Marcus]

The best thing for California would be a bond default. Then, and only then, when the lackey's in Sacramento can't go begging to Wall Street for more bond funding, will they take seriously the sort of spending cuts and fiscal restructuring this state needs. Raising taxes isn't an option. Californians, especially property owners, pay more than enough. In any event raising taxes during a recession is the last thing you do. Second, do away with all the insane propositions, especially concerning bonds. The average Californian doesn't even know what a bond is, let alone competent enough to decide whether or not we should issue billions of dollars in them for pet projects. Even in this downturn (depression for CA) Sacramento wants to issue $11b in bonds for water projects catered to the radical environmentalist lobby. Enough.

[Gus]

The amount of property tax paid by large portions of California property owners relative to the value of their property is a joke. Look in any well-established, desirable neighborhood and you will find a significant number of owners who pay $2000 a year in property tax for houses worth $2 million (an even bigger percentage of people who pay $1200 a year in property tax for houses worth $1 million). A two minute search of Redfin turned up a couple quick examples --

This property owner pays $3,800 for a $2.8 million home, an effective tax rate of .13%

250 S. Canyon View Dr, Los Angeles, CA 90049 (sorry -- link wouldn't work)

Or this one, a $2.4 million home for which the owner pays $2,194 a year, an effective tax rate of .09%:

830 Brooktree Rd, Pacific Palisades 90272

Property tax on a $1 or $2 million property in almost any other state would be many multiples of that -- for example, the property tax on a $2 million house in purportedly low-tax Texas would be in the neighborhood of $40,000 per year (20 times what some Californian's pay for their $2 million property). Indeed, when compared to other states, California has one of the lowest effective property tax rates in the country.

That California has high property taxes is a myth typically propagated by the very people who benefit most from our perverse property tax system (older, land rich, cash poor) which burdens both the young and upwardly mobile and our state as a whole.

[Matt]

The Great Plains states likely are the future of America - most of the economic activity (farming) is controlled by a handful of megacorporations who literally patent life itself (FU, Monsanto). Meanwhile, the remainder of the population are reduced to ignorant gun-toting Bible-hugging teabagging idiots who vote for whoever promises to hate the gheys, the librls and the black people the most.

[H. Craig Bradley]

CALIFORNIA DREAM'IN

Is CALifornia and Oregon going to become the new (economic) "Dust Bowl" with thousands of Calees and Orees migrating to the financial stronger Great Plains states like Texas, Nebraska, North Dakota, South Dakota, Wyoming and Montana?

Such a population shift away from the Pacific States and their basket-case state economies and mismanagement would be a giant economic and demographic change, reversing 75 years of continual depopulation of the Great Plains States (The only region to consistantly loose population every year since 1930).

I imagine this trend could be sparked if our economy ends up in a so called "Double Dip" Recession or if California missed a Muni Bond payment or defaulted on some of its debt. We then could have another credit market freeze-up and stocks could plummet again. Housing would free fall, state tax revenue would crater and there would be little left for the unemployed. (California would have to curtail its generous unemployment benefit payments and layoff state government workers).