Brown Faces a Reckoning in California as $28 Billion Gap Shadows Inaugural – Jerry Brown returns as California governor today after an absence of almost three decades, facing a “day of reckoning” over a $28 billion budget gap that promises battles with lawmakers, unions and investors threatening to shun the bonds of the most-indebted state. Brown, 72, a Democrat who served two terms as governor from 1975 to 1983, has pledged an austerity budget, due Jan. 10, that will be free from gimmicks and that will skirt the gridlock that forced the state to pay bills with IOUs two years ago. . Whether that will mean higher taxes, he hasn’t said. In the U.S. state with the biggest economy and population, Brown faces a super-size version of the stress governors confront coast to coast. States will contend with about $140 billion in deficits in the next fiscal year after closing $160 billion in gaps this year, the Center on Budget and Policy Priorities, a Washington research group, estimated Dec. 16.
Illinois Has Days to Plug $13 Billion Deficit That Took Years to Produce – Illinois lawmakers will try this week to accomplish in a few days what they have been unable to do in the past two years — resolve the state’s worst financial crisis. The legislative session that begins today will take aim at a budget deficit of at least $13 billion, including a backlog of more than $6 billion in unpaid bills and almost $4 billion in missed payments to underfunded state pensions. The fiscal mess is largely of the lawmakers’ own making, and failure to address the shortages threatens public schools, local governments and other public services, said Dan Hynes, the state’s outgoing comptroller. “We’ve reached a very critical and concerning point,” “What’s missing right now is a general understanding by the public of where we are, of how bad it is, and what the fallout would be if we don’t deal with it properly.”
Lawmakers Return to Springfield; Tax Hike Possible – State lawmakers head back to Springfield tomorrow to finish up the lame duck session. And a possible income tax hike could be bigger than originally thought. State Representatives returning to Springfield have some major decisions to make… and a possible income tax increase dominates their agenda. "It would be from the current three percent to five percent for individuals, that being said, that will generate in round numbers five to six billion dollars a year." Representative Jim Sacia says that income would cut the deficit in half, but the budget still needs to be cut. "I’ve watched this state increase income in round numbers a billion dollar a year, we have outspent it three to one every sing one of the eight years I’ve been there, that’s unconscionable."
Medicaid cost crisis looms for Bay State -Governor Deval Patrick approved a record $9.6 billion last July for the state’s health insurance program for the poor — sufficient, he assumed, to last a year. But the program’s costs quickly outpaced expectations, forcing the governor to approve an additional $329 million in October and then seek $258 million more, which lawmakers approved last week. And even that may not last, with six months remaining in the budget year. The ballooning cost of Medicaid is one of the biggest challenges facing Massachusetts and other states, which have seen demand for the program jump during the recession as increasing numbers of unemployed residents enroll in the subsidized insurance plan.
Hard choices ahead for Medicaid – Gov.-elect Terry Branstad rightly characterized Medicaid as the biggest challenge in the state budget. The federal government picks up much of the cost of health insurance for the poor. However, the expense to Iowa is expected to increase from $856 million in fiscal year 2011 to $1.16 billion in 2012. Among the ideas for controlling costs Branstad said he is willing to consider: using more generic drugs and increasing co-payments for some enrollees. "I feel so strongly that people need to have some skin in the game,"
State’s budget deficit presents difficulties – The main issue on almost every state lawmaker’s mind this year is the budget. The $500 million budget deficit for the next fiscal year is "a tough thing to get a grasp on this year,". "It’s tough, and it’s tough on everybody," That’s about $83 for each of the 6 million Missourians, according to the most recent Census estimate. Presumptive House Speaker Steve Tilley has said Republicans won’t support tax increases, so the General Assembly will probably have to find that $500 million in cuts to the budget. And they have a limited pool to cut from. Only a little less than a third — about $7.5 billion — of this year’s budget comes from "general revenue," or places where legislators are free to cut, said Budget Director Linda Luebbering. About three-fourths of general revenue is now spent on health care or education, which means legislators face some tough choices.
Texas social services chief blunt on severity of cutbacks on children, elderly – As lawmakers gear up to hunt for every penny they can use against an unprecedented budget gap, Texas’ safety net for the poor and vulnerable figures to get a lot of scrutiny. At lawmakers’ elbows will be the chief of state social services, Tom Suehs. He predicts an agonizing process. "There are not too many nice and easy decisions," he said recently. "That’s why they’re going to migrate to cutting some of the optional" services in Medicaid, a health program covering 3.3 million poor children, pregnant women and frail adults. But Suehs is quick to add that optional services – which can be taken away from adults on the program, though not from youngsters – are not frills. Cuts will be costly and painful.
Underemployed at 17% Shows Small Business Gain With Part-Timers – As the U.S. economy gains momentum heading into 2011, small-business employment is lagging behind other drivers of the recovery. While past rebounds were led by companies with fewer than 500 people adding full-time workers, some owners say they’ll rely on part-time help and push their staffs to be more productive as they wait as much as a year for demand to improve. This has helped keep unemployment near a quarter-century high, even as household purchases have risen for five straight months.
NY county budgets reveal painful times – Broome isn’t the only county in New York with budget woes. In Sullivan County, legislators froze salaries because of growing pension and health care costs. In Dutchess County, 85 positions aren’t being filled and agencies are being consolidated. In Monroe County, 114 positions are being eliminated, two buildings are being sold and federal stimulus money is being used to close a $46 million budget gap. And money woes aren’t just limited to county governments. In an extreme case, the City of Newburgh recently approved a 71 percent property tax increase. The scenes of financial distress are playing out across the state as counties start a new fiscal year. The problem is they are facing growing costs for pension, health care and mandated services at a time when tax revenue has stagnated and state aid has flattened, county officials said.
Cuomo Plans 1-Year Pay Freeze for State Workers – Cuomo quickly brushed away the nostalgia to begin governing in a historic fiscal and ethical crisis in New York state government, leaving few resources and little time for the liberal politics in which he and his father engaged for decades. Declaring "no new taxes, period," Cuomo told reporters he will seek to allow a temporary income tax on the wealthy to sunset and enforce 900 layoffs opposed by some of New York’s strongest special interests. The state’s powerful public workers unions, traditional Democratic allies, have strongly opposed the layoffs ordered by former Democratic Gov. David Paterson. Paterson had ordered the layoffs after he said union leaders refused to contribute $250 million in concessions in the face of New York’s fiscal crisis. Promoted by Democrats as a "millionaire’s tax," the temporary income tax surcharge takes a bigger bite out of New Yorkers making as little as $200,000 a year. The tax raises more than $1 billion annually.
school officials say the city school system faces a $30 million deficit in the coming fiscal year with no reserve fund to make up the difference.
Chief financial officer Arthur Watts tells The Birmingham News the city is paying $17 million in salaries and benefits this year with one-time federal stimulus money. That won’t be available when fiscal year 2012 starts on Oct. 1.
Watts says the district is also losing about $8 million in state funding because of declining enrollment and about $5 million will be lost to an anticipated 4 percent proration in 2012.
Watts says that means the city will need to close and consolidate more schools, sell surplus property and have mass layoffs.
Serious, high-cost issues loom in 2011 for Asheville area – Some news is all but impossible to predict. But a massive, $3-billion-plus statewide budget deficit that likely will affect every North Carolinian next year is not. It’s waiting for state legislators when the General Assembly reconvenes Jan. 26. Likewise, county and city officials know some of the looming tasks they’ll have to handle in 2011, as do local educators. Experts in local real estate and the job market also see some elements of 2011 coming into focus, and that may include a slightly sunnier housing market and cautious optimism when it comes to job growth. But the looming statewide budget deficit, which will easily surpass $3 billion and may approach $3.7 billion, depending which source you use, undoubtedly will take center stage.
New Conn. governor and lawmakers face fiscal woes – Shortly after Connecticut Gov.-elect Dan Malloy takes the oath of office on Wednesday, amid pomp and circumstance, it will be time to face a harsh reality. . "I’ve been spending a lot of time preparing people for how desperately bad things are in Connecticut. I think that most people are starting to understand that we have the largest per capita deficit in the United States by all accounts," Malloy said."I think what we’ll be saying on the 5th, ‘These are challenging times. We will rise to the challenge. We have a history of rising to the challenge,’" Malloy said. Connecticut’s new governor and legislature officially take office on Wednesday at a time when daunting financial challenges will undoubtedly scale back expectations for this year’s legislative session. Asked what he would consider a success from the 2011 session, Malloy jokingly replied, "June 1st," referring to one of the final days of the session.
Tennessee, Georgia face big budget hurdles – The Great Recession may be over, but Tennessee and Georgia leaders say its painful aftermath lives on as they face the need for deeper cuts in upcoming 2011-12 budgets. States are looking at a financial cliff because federal stimulus funds will disappear this year before state tax revenues have recovered from their worst pummeling in decades. In Georgia, where state spending was slashed from $21 billion to $17 billion over the last three years, Gov.-elect Nathan Deal and majority Republican lawmakers are looking to cut an additional $1.5 billion to $2 billion. "It’ll be painful, and we’re going to be looking — just like we did the past couple of years — to where we can streamline,"
State budget deficit threatens tuition increase – Until recently, Ohio State students had avoided that phrase and higher bills, but Buckeyes should start planning to hear it frequently and prepare to pay more to attend classes. Ohio Gov.-elect John Kasich, who is expecting a more than $8 billion deficit and must propose a new budget by March 15, refuses to rule out further tuition hikes. OSU officials already are cutting costs, and other state universities facing budget gaps have started raising tuition. In a Cincinnati Enquirer article published Dec. 8, Kasich said higher education spending is rising too quickly, but refused to predict what the funding would be or whether the state would put a cap on tuition or college spending.
Bank of America Sees $2 Billion Charge on Home Loans – Bank of America Corp., the biggest U.S. lender by assets, paid $2.8 billion to Freddie Mac and Fannie Mae after the U.S.-owned firms demanded the company buy back mortgages they said were based on faulty data. The bank rose as much as 5.6 percent in New York trading. Resolving the disputes cost Bank of America about $3 billion in the fourth quarter, including additions to loss reserves for loans that weren’t a part of the deals announced today, the Charlotte, North Carolina-based lender said in a statement. The agreements “largely addressed” liabilities from Fannie Mae and Freddie Mac, Bank of America Chief Financial Officer Charles H. Noski said on a conference call. Mortgage buyers including McLean, Virginia-based Freddie Mac and Washington-based Fannie Mae are trying to force lenders to repurchase loans that may have been made with incorrect data on income and home values. Before today’s announcement, Bank of America faced $12.9 billion in unresolved putback demands, with about half related to government-sponsored entities, according to an Oct. 19 presentation. The company said in October it had reserved $4.4 billion for costs related to the problem.