By Frank Keegan, Editor of Watchdog.org

Taxpayers, prepare to be extorted and robbed.

If the first two state-of-the-state speeches Wednesday are any indication, we are in for it.

Fiscal mismanagement leaders California and New York opened the hunting season on taxpayers.

Forty three other state legislatures convene soon to deal with the fiscal carnage they wrought through political profligacy and false promises to dedicated state workers during recent bubble years.

As of December, the National Conference of State Legislatures fiscal survey found: “Thirty-six states already report another round of gaps since FY 2010 began. The total now hit $28.2 billion, and the fiscal year for most states doesn’t end until June.” They already are in the hole despite raising taxes, cutting spending, squandering “rainy day” funds and using federal debt and accounting tricks to close $146 billion in cumulative budget gaps.

Those shortfalls pale against the lurid reality of unfunded promises to retirees, deferred public works projects and years of accounting tricks hiding true deficits.

Compounding all that is the fact that $248 billion in federal American Recovery and Reinvestment Act funds stop Dec. 31, halfway through most states’ fiscal years.

And, according to the National Governor’s Association “Fiscal Survey of States” released last week, “the $87 billion in Medicaid funds and the $48 billion in state stabilization funds … allowed states to offset planned budget cuts and tax increases,” meaning that’s another $135 billion they are going to have to take from somebody next year.

 Loading ...

NGA admits some of these blunders and warn that taxpayers are in for a shakedown well after any national economic growth: “Even when recovery begins in the 2014–2015 period, states will be faced with a huge ‘over hang’ in needs and will have to accelerate payments into their retiree pension and health care trust funds, as well as fund deferred maintenance and technology and infrastructure investments. They will also have to rebuild contingency or rainy day funds. All of these needs were postponed or deferred during the 2009-2011 period and will have to be made up toward the end of the decade. According to a 2007 Pew Center on the States report, states have an outstanding liability of about $2.73 trillion in employee retirement, health and other benefits coming due over the next several decades, of which more than $731 billion is unfunded.”

Guess what? Things have gotten worse since 2007; more than a couple of trillion dollars worse just for pensions and retiree health benefits alone.

Orin Kramer, chief executive of New Jersey’s beleaguered pension fund, told the Financial Times this week America’s total state pension unfunded liability is more than $2 trillion.

And the Government Accountability Office just released a study showing a minimum $530 billion deficit for retirees’ Other Post Employment Benefits, though GAO experts said that number is too low.

According to the American Society of Civil Engineers, America needs to invest $2.2 trillion over the next five years just to fix and replace “critical infrastructure” beyond its “design life.” That means crumbling bridges, roads, mass transit and water systems, dangerous dams and spewing sewage.

The day of reckoning is upon us. Don’t count on the governors and legislators who have done this to us taking any of the cost out of their paychecks and benefits.

Don’t even count on them telling us about it. Two quick bipartisan egregious examples:

Republican California Gov. Arnold Schwarzenegger and Democrat David Paterson of New York gave their state of the state speeches Wednesday without including these huge hidden deficits.

Schwarzenegger put his state’s operating deficit at $20 billion and called for reform of “unsustainable” pension benefits going forward, but did not specifically include the minimum $62 billion in liability for retiree health benefits and Zero dollars set aside to pay it even though California increased taxes $10 billion last year.

Paterson, facing an estimated $8 billion operating deficit, did not mention the $51 billion minimum retiree health care liability and, again, the Zero funding, though he also did call for reform of the state’s notoriously corrupt pension system. New York increased taxes more than $6 billion last year.

If these two speeches are any indication of how honest governors are going to be with taxpayers about the mess they’ve gotten us into, we would be safe to expect every governor and every legislature to deceive us.

According to the Center on Budget and Policy Priorities, the fiscal crisis of the states could quench any spark of national economic recovery.

Increasing taxes to pay for such government folly will guarantee it.

Now is the time for citizens to act. We must raise our voices to stop devastating tax increases to pay for folly.

This catastrophe came upon us without warning from traditional news media. It is taking most legislators and even some governors by surprise.

If ever there was a reason for citizens to become watchdogs, this is it. Contact your governors and lawmakers, learn details of your state budget.

LINKS:
National Conference of State Legislatures
National Governors Association
National Association of State Budget Officers
Government Accountability Office
American Society of Civil Engineers
Center on Budget and Policy Priorities