|
Nation -
Finance
|
|
Daniel C. Vock (Stateline)
|
|
Friday, 14 November 2008 11:00 |
 Washington, DC, USA. States aren't waiting for help from Washington, D.C. to boost their economies. More than half a dozen have passed or proposed their own economic stimulus packages designed to reinvigorate local businesses with new construction, loans to hometown banks and other job-creating activities.
The state efforts come as Congress considers a national economic stimulus package in the wake of the Wall Street collapse this fall. Among the options for Congress are extending unemployment benefits, sending more Medicaid money to states to boost the health care industry and launching a major new public works initiative.
Congress could pass its package in a lame-duck session this year, or it could wait until after Barack Obama is sworn in as president next Jan. 20. In the meantime, a handful of states are pressing ahead with their own economic revival plans.
“It’s clearly unusual and very innovative. It’s a great way to get state economies going again,” said Sujit CanagaRetna, senior fiscal analyst for the Council of State Governments.
The governors of New Jersey and California have summoned lawmakers back to their state capitols to take up their governors’ economic stimulus packages. Florida, Ohio and Vermont passed plans earlier this year. And the governors of Oregon, Washington and Wisconsin are pitching their ideas for legislators to act on in January.
Illinois Treasurer Alexi Giannoulias, a former family banker, said he’ll invest up to $1 billion of the state’s money in local banks and credit unions that aren’t eligible for the federal bailout of major banks and other financial institutions. The investments make sense for the state, because it can get a better rate of return than it would from Treasury bonds, commercial paper or other typical investments, he told  Stateline.org.
But the move is also designed to help people who go to these banks for loans cope with the economic downturn.
“It’s tougher for people who want to start a business or buy a house to tap into a line of credit, and that’s a grave concern for me,” he said. Already, 31 of Illinois’ 102 counties have unemployment of 8 percent or more, and a tight credit market could make that worse, he said.
New Jersey has undertaken a similar effort to help its financial institutions, and Michigan Gov. Jennifer Granholm (D) is working out a plan to loan out up to $150 million to local banks, who would, in turn, make loans to Michigan residents and businesses.
CanagaRetna said state stimulus packages need to be “timely, targeted and temporary” to be effective. That guarantees that money will be spent quickly and people will get work right away, he explained.
But the economic downturn is doubly troublesome for states. The states with economies most in need of reviving are also the ones with treasuries that are most likely to be empty — too empty to be doling out stimulus packages.
The crisis that hit Wall Street in September — and led to a $750 billion federal bail-out effort for major financial institutions — only worsened states’ rapidly deteriorating financial situations. The collapse of the housing market coupled with high energy prices already had led to a sharp decline in tax revenues just as states were finally finding their financial footing after the 2002-2003 downturn.
One way cash-strapped states are paying for stimulus packages is through bonding, said CanagaRetna.
States have repeatedly turned to borrowing money during the anti-tax climate of the last decade. For instance, state net tax-supported debt doubled in that time, growing from $198 billion in 1998 to $398 billion in 2007.
California Gov. Arnold Schwarzenegger (R) wants to get a jump on transportation construction slated for next year by using next year’s bond proceeds now. Ohio voters approved the final piece of the state’s $1.6 billion stimulus package, when 70 percent of them approved on Nov. 4 $400 million in bonds for environmental clean-ups.
But just two months ago, states could barely sell their bonds on the open market. Things got so bad, Schwarzenegger approached the federal government about the possibility of California borrowing $7 billion to keep state government running. Since that scare, though, there’s been a “sea change” in the bond markets, and states have once again been able to sell their debt, CanagaRetna said.
The other advantage to bonds is that they fund projects that themselves enhance a region’s economy, like roads, bridges, rail lines and sewer systems.
“One of the most important investments we can make during a slow economy is in public works projects, such as transportation,” said Oregon Gov. Ted Kulongoski (D) at a legislative hearing Nov. 10.
“We have a long bipartisan tradition of investing in transportation in good times and in bad times.Building roads, bridges and public transit is good for the economy and our citizens by putting people back to work,” he said as he introduced $1 billion in new transportation projects.
Kulongoski’s plan would include tax hikes on gas and cigarettes, higher vehicle title fees and $600 million in new bonding.
New Jersey Gov. Jon Corzine (D), on the other hand, is trying to spur the economy without any new taxes. He urged lawmakers in mid-October to give small businesses a $3,000 tax credit for each new employee they hired. And Corzine expedited construction projects for tollways, schools and utilities.
“The projects are advancing capital plans already authorized, drawn and funded. We are only moving them forward by expediting the shovels in the ground and boots on the pavement because we need to provide employment now. These efforts will simply help bridge the recession,” he said.
California Gov. Arnold Schwarzenegger envisions new hospitals, patched roads and water projects as key components of getting the Golden State’s economy back on track. He called on legislators to help businesses move even quicker by temporarily setting aside some environmental regulations and making labor laws about overtime and meal breaks less strict.
“We don’t have the luxury of waiting for January when I make my budget proposal or hold my State of the State Address,” Schwarzenegger said. “We have a dramatic situation here and it takes dramatic solutions and immediate action. We must stop the bleeding.”
Washington Gov. Chris Gregoire (D) is crafting a state economic stimulus package and will likely unveil it in late November or early December, spokeswoman Laura Lockard said.
Wisconsin Gov. Jim Doyle (D) and Democratic lawmakers are working on a plan to boost infrastructure projects, help homeowners facing foreclosure and improve lending. Their plan is expected to be taken up when legislators convene in January.
The new proposals come on the heels of stimulus packages that made it into law in three other states.
- As part of Gov. Charlie Crist’s (R) “Accelerate Florida” program, Florida has sped up work on $1.4 billion of spending on 179 road projects, according to his office. State officials claim the work will employ 39,000 people and lead to $7.84 billion in new economic activity in the state, good news in a state racked with job losses.
- Ohio Gov. Ted Strickland (D) hopes the Buckeye State’s stimulus package will create 57,000 jobs. The $1.6 billion initiative includes money for road and bridge projects, internships for college graduates and new environmental clean-up efforts.
- Vermont Gov. Jim Douglas (R) convinced legislators late in session to approve bonds for transportation repairs, mortgage assistance programs and a sales-tax holiday to draw shoppers from Canada and other states. The five-year transportation component boosted road and bridge projects by $12 million this year, an increase of roughly 10 percent.
|
|
Last Updated on Friday, 14 November 2008 17:09 |
|
Nation -
Finance
|
|
Pamela M. Prah (Stateline)
|
|
Friday, 31 October 2008 18:00 |
|
Washington, DC, USA. Staggered by turbulent financial markets and anxious about a rapidly slumping economy, many state governments are slashing their budgets, frantically trying to stay afloat.
After two years free of major fiscal worries, state policymakers in 2008 were hit by a triple-whammy: a Wall Street meltdown that made it more difficult and costly to borrow; a record number of home foreclosures that took a big bite out of tax revenues; and soaring oil and gas prices that squeezed budgets of all but the energy-producing states.
With calendar 2008 nearing an end, Stateline.org’s annual state-by-state review of major accomplishments finds lawmakers girding for big spending cuts in 2009 and beyond. California and Massachusetts were so worried about paying their monthly bills in October they considered asking the federal government for loans.
Key Topics In This Report:
- States patch deficits with tax hikes, four-day work weeks
- Cash-strapped California still makes history
- Modest changes in health reforms
- Mortgage crisis draws new state regulation
- Gay rights, abortion top among social issues
- Emotions run high over immigration proposals
- Global warming tops environmental concerns
- Politics and scandals mark 2008
|
|
Last Updated on Saturday, 01 November 2008 15:24 |
|
|
Nation -
Finance
|
|
Pamela M. Prah (Stateline)
|
|
Thursday, 24 July 2008 17:00 |
|
Washngton, DC, USA. The drumbeat of bad fiscal news from statehouses is intensifying. States collectively faced deficits of $40.3 billion in writing their current budgets — triple the $13 billion shortfall states weathered the previous year, a new report released July 23 shows.
"The overall state fiscal condition changed significantly in the past year, and for the most part deteriorated," Corina Eckl, director of fiscal affairs for the National Conference of State Legislatures (NCSL), said as she released the report during the organization’s conference in New Orleans.
State lawmakers knew revenues would drop, but the decline was worse than expected. In April, 23 states had projected budget gaps totaling $26 billion for fiscal 2009, which began July 1 in all but four states. By June that number rose to 31 states, NCSL said.
The troubled budget picture in all but about a dozen energy and farm states is driven largely by reduced revenues, Eckl said. "No single tax is the culprit." Consumer purchases are expected to continue to decline in many states, so the situation is expected to worsen.
Rising energy costs and the housing slump and mortgage crisis also make states nervous that their budgets will bleed red ink. States are saying "we're holding our breath," looking at 2010 and beyond, Eckl said.
The report does not include information for several key states. California, Illinois, Michigan and North Carolina had not completed their budgets by the time the report was written. Arizona, Massachusetts and Ohio also did not have final figures. These missing states represent one-third of the total budget dollars.
California’s projected $15.2 billion deficit is among the biggest. The state is without a 2009 budget even though its fiscal year began July 1.
States largely avoided raising taxes, according to NCSL, and instead:
- Cut spending: 10 states made across-the-board reductions; 12 targeted higher education; 11 cut elementary-secondary education; and 10 cut Medicaid.
- Trimmed state payrolls: Florida, Maine, Tennessee and Vermont laid off state employees, and nine states imposed hiring freezes.
- Tapped reserves: 14 states tapped rainy-day or other reserve funds. Nevada used $267 million, virtually eliminating its rainy-day fund; Minnesota used $500 million, nearly half its balance; and Massachusetts used $310 million.
- Used tobacco funds: Oklahoma borrowed $100 million in excess tobacco tax funds, and Vermont used proceeds from its legal settlement with tobacco companies to help cover Medicaid costs.
- Expanded gambling: Delaware allowed tracks to operate 24 hours a day, while Rhode Island is letting casinos stay open 24 hours three days a week.
Unlike the federal government, states cannot run deficits, forcing them to find the money or cut spending to balance their budgets.
There is one bright spot. While tourism may be down for some states because Americans are traveling less, states that are a draw for international tourism, such as Florida and Vermont, are benefiting from foreign visitors taking advantage of the weak U.S. dollar.
|
|
Last Updated on Thursday, 24 July 2008 06:09 |
|
Nation -
Finance
|
|
Stephen C. Fehr (Stateline)
|
|
Tuesday, 08 July 2008 17:00 |
|
Washington, DC, USA. Not every state is having budget troubles. Alaska, Texas, West Virginia and others are faring better than most because of their booming energy industries.
But North Dakota stands out because it has energy and agriculture — and not many people.
Devil’s Lake, North Dakota is as remote a place as there is in America. Canada lies about 60 miles to the north, Minnesota about 80 miles to the east. It is here, on farms such as Eric Aasmundstad’s, where you begin to understand why surprising North Dakota is so well-off compared to most of the rest of the country.
Aasmundstad grows corn, soybeans and wheat on a 3,000-acre farm. Timely, soil-soaking rains have helped produce two years of bumper crops at a time of record high prices paid to farmers. More money in Aasmundstad’s pocket — and those of his neighbors — ripples through North Dakota’s economy in the form of additional sales and income taxes.
“I think this is as nice a year as it’s ever looked,” says Aasmundstad, 50, who predicts that his gross income will rise by 50 percent between 2006 and the end of this year.
The state is also blessed with an oil deposit estimated at 400 billion barrels that is producing at record levels. With the price of oil over $140 a barrel, it’s no wonder North Dakota led the nation in personal income growth in first three months of the year.
“We feel extremely fortunate,” said Pam Sharp, the state budget director.
North Dakota represents the flip side of the budget crisis gripping many state and local governments as the July 1 fiscal year gets underway. Though nearly half of the states have had to deal with budget shortfalls and other troubles this year, North Dakota officials say their state has a $740 million surplus, a staggering figure for a state that ranks 48th in population and whose general fund budget is about $1.2 billion a year.
Other energy and agriculture states are escaping the national economic downturn for the most part, although budget officials are not at all certain their states will be completely immune from the impacts of a sustained slump in the housing market, high fuel prices and the rise in unemployment. Alaska, Colorado, Idaho, Louisiana, Montana, New Mexico, Oklahoma, South Dakota, Texas, Utah, West Virginia and Wyoming have benefited from high energy and farm prices.
North Dakota doesn’t have the largest surplus—Alaska and Texas each could be as much as $10 billion in the black in January—but what is striking about its success is how well the state is doing compared to others in its own region. A report released July 1 (2008) by the Creighton Economic Forecasting Group in Nebraska said that Midwestern states as a whole were “teetering on recession” in part because of pressure from inflation and the impact of the spring floods and storms.
“Contrary to the region and the nation, North Dakota has not experienced a downturn in economic activity,” the report said.
Besides the agricultural and energy windfalls, the stars have aligned for the state in other ways. Home values are going up in North Dakota, in contrast to many areas, because the state economy is growing and the labor market is strong. The state also has other relatively stable employers in two Air Force bases and over 20 colleges and universities. Its jobless rate is close to 3 percent, compared to 5.5 percent nationally.
North Dakota has not been swallowed by the subprime mortgage crisis. The state does not attract large numbers of new residents, so there is not much demand for housing loans. Many of the victims of the subprime loan fiasco were low-income minorities, but fewer than 1 in 10 North Dakota residents are minorities. Because of their small size, North Dakota’s banks generally do not engage in the practice of creating mortgage-backed securities and selling them to investors, the practice behind the subprime debacle.
The state’s proximity to Canada has turned out to be another advantage. Canada is North Dakota’s largest export market, which at $1 billion last year is a reason why the state is among the national export leaders. Shoppers from Winnipeg, lured by the weak dollar, have been pouring across the border to stores in Grand Forks and Fargo to buy items made in North Dakota, such as food and personal care products, eat in local restaurants and stay overnight.
The question for Gov. John Hoeven (R) and the state Legislature is what to do with the $740 million or whatever the surplus turns out to be when lawmakers return to Bismarck in January.
About $200 million will be stowed away for an emergency. That leaves the rest to be spent in a state with no pressing financial need.
Mark Berntson, a music teacher in Fargo, said part of the surplus should be distributed to education. Surveys consistently show North Dakota teacher salaries among the lowest in the country. Rachel Pederson, a server in a Fargo diner, says the money should be put into renewable energy such as wind. “We have so much extra land—and so much wind,” she said.
Tax relief seems likely, though low-tax North Dakota ranks 39th in the most recent CNN-Money magazine survey of state and local tax burdens. A year ago, the Legislature approved $115 million in property tax relief, but the sentiment for additional relief is still strong. Efforts are under way to collect signatures to put initiatives on the ballot this fall slashing personal income taxes in half and capping state spending at the annual rate of growth of the federal consumer price index.
Hoeven, who is seeking a third term as governor Nov. 4, will no doubt benefit from the state’s roaring economy as Democratic challenger Tim Mathern of Fargo tries to unseat him.
“In North Dakota we don’t throw people out of office unless there’s a reason,” said Lloyd Omdahl, a former lieutenant governor and retired political science professor at the University of North Dakota (UND).
 Mathern, a state senator, said he is trying to convince people the state’s prosperity is a double-sided coin. “Too much money in the bank is an indication of mismanagement,” he said. “It should not have been taken from citizens or should have been invested more creatively.”
He said the surplus should be spent three ways: reduce property taxes, increase aid to education and improve roads, bridges and public buildings. Mathern’s view is not that different from the governor’s, who said the state should divide the money among a reserve fund, tax relief and priority programs, such as education and health care.
Whether North Dakota sustains its economic momentum, Hoeven said, depends on diversifying its economy beyond energy and agriculture. State economic development officials are recruiting industries such as technology and tourism, with some success. Microsoft recently opened a branch in Fargo, hiring about 1,400 workers.
If the industries come, though, the state will need more people to fill jobs. After years of decline, North Dakota’s population has increased 1 percent since 2003 to 639,715, according to Census Bureau estimates.
“North Dakota’s tight labor market may restrain the state from reaching its potential,” said Patrick Schmid of Moody’s Economy.com, which provides economic forecasting information for the state.
Hoeven and other officials also are monitoring the national economic downturn, which could extend to North Dakota if it is prolonged.
“The really big question mark is the price of fuel,” Flynn said.
“Transportation costs will affect the price of goods. There’s a risk, too, if energy prices stay high that people will spend more of their income on fuel.”
For now, though, North Dakotans are reveling in their good fortune. The number of millionaires has risen 46 percent in the most recent two-year period.
|
|
Last Updated on Tuesday, 08 July 2008 17:01 |
|
Washington, DC, USA. With President-elect Barack Obama and the Democratic Congress pledging quick action on a proposed multi-billion dollar fiscal package to boost the U.S. economy, states are banking they will get a cut of any federal rescue plan. 
The TS-Si News Service
and the TS-Si Research Service are collaborations of TS-Si officials, staff, contributors, and corresponding institutions. The contents do not necessarily convey official positions of TS-Si or its owners, participants, partners, or affiliates.