Gov’s Need to Admit Fiscal Reality Behind Cries of “Revenue Crisis”

By   /   October 9, 2009  /   1 Comment

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Come on governors, confess to the American people. Those “balanced” budgets you just passed are shams.

Admit states are in much worse – at least $5 trillion worse — fiscal shape despite the fact that you are squeezing as much money out of taxpayers as you did only three years ago.

Recent data from the U.S. Census Bureau reveals Americans may be worth less and earn less this year, but the resulting drop in state tax revenues blamed for service cutbacks, layoffs and furloughs actually is not as severe as state leaders claim.

In fact, recently released second quarter data showing a 16.3 percent drop from the same period last year still puts states more than $3 billion ahead of  the same quarter in 2005, when there was no “crisis” in state funding, and $865 million above 2006 for the equivalent 12 months.

Comparable annual data since 1993 show total state taxation increased 120.8 percent through 2008. That’s 2.5 times inflation, 1.5 times gross domestic product, almost six times household growth, more than 12 times median household income and almost 10 times growth in average household income.

How bad is it? Ongoing overspending for operations – presented as a “revenue crisis” by virtually every governor – does not include underfunded pensions and unfunded retirement health care. Those could cost $2.6 trillion.

States squeezed almost $430 billion more out of taxpayers over the last 15 years, according to latest data from the Bureau of Economic Analysis.

Yet the U.S. Government Accountability Office Update on State and Local Fiscal Pressures says: “federal assistance to address the current recession will not alleviate the long-term structural fiscal challenges facing state and local governments.”

When state leaders across America cry revenue shortfall – the operating deficits for all state governments through 2011 is conservatively estimated at $350 billion even with federal “stimulus” money and accounting tricks  — we need to remind them they are lying. Then we need to ask them what they did with our money.

One important thing we know they did NOT do is pay down long-term obligations for state employee retirement benefits.

According to the Center for Retirement Research at Boston College, as of November public employee retirement plans were $1 trillion in the hole. A January 2008 Government Accountability Office report said: “The extent of these liabilities nationwide is not yet known, but some predict they will be very large, possibly exceeding a trillion dollars in present value terms.” That’s before markets crashed.

Compounding it is the false promise of retirement health care. Not only are future health care cost increases impossible to calculate, states have invested nothing to pay for it. They don’t even put that guaranteed deficit on the books. According to the GAO report, “For retiree health benefits, studies estimate …unfunded liability for state and local governments between $600 billion and $1.6 trillion in present value terms.”

Add state share of the growing $320 billion Medicaid cost – even before any health care reform expands it – and $2.2 trillion the American Society of Civil Engineers estimates our crumbling infrastructure needs, and we get some idea how deep into the fiscal abyss they have led us.

This stealth deficit could sabotage any recovery. No level of economic growth can fund it.

It literally is beyond the capacity of taxpayers.

It pits younger against older workers as more current revenue diverts to retirees.

It reduces essential services for citizens – many with hemorrhaging retirement plans and devastated investments of our own — who will have even less to invest and spend.

And most insidiously, increased tax load and reduced services hurt businesses and industries needed for the real economic growth.

We must make real cuts, and we need to begin cutting from the top. Our leaders are to blame.

They betrayed taxpayers. They betrayed state employees. They betrayed everyone in need who depends on state services.

Links: Inflation rate calculator


  • Are your facts straight? I am not trying to be a jerk, but I don’t see how this makes total sense!