Nevada Goes Nuts, Cutting Spending On Education, Adult Care, Hearing Aids, Speech Therapy, Adult Diapers

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If the US has its equivalent to the Greece problem, it’s definitely the state budgets (rather than the Federal one) that we have to worry about.

Here’s what it looks like when a state has to make the hard choices, in this case Nevada.

Yesterday the state announced deep cuts in education and health and human services, eliminating hearing aids, adult care, and speech therapy, just to name a few things. Dentures and adult diapers are gone too.

Just like in Greece, there was a strike (among UNLV students, so we doubt it had a huge impact). Of course this is just one such situation.

Check out America’s 10 “Greek” debacles >

Methodology notes: The top 10 ranking is taken from a November 2009 Pew centre on the States study. The ranking looks at budget gaps, foreclosure rates, lost state revenues, unemployment, money-management practices, and where “super-majority” requirements are killing efforts to fix the financial mess. Scores for each category are tallied for an overall ranking. We bring you the top 10, counting down from bad to worst. The higher score, the bigger the crisis. California gets a 30, while the national average is 17.

The deficit numbers are taken from a December 2009 centre on Budget and Policy Priorities’ State Fiscal Project study.

Information on recent and looming deficit fixes are from media reports and a separate CBPP report.

#10 Wisconsin

Total 2010 budget gap: $3.2 billion / per cent of General Fund Budget: 23.2%

What's getting cut: As the Associated Press notes, the state government already implemented furloughs, cut jobs, increased taxes ($5 billion) and cut spending in 2009. The reductions have hit state agencies, schools and local governments, in addition to ordering 16 days of unpaid leave for most state workers over a two-year period.

The state is on track to cut $608 million from Medicaid. Reductions have been outlined in 66 areas, according to another AP report, including 'accounting maneuvers such as delaying payments into the next budget year, increasing the use of generic drugs, reducing reimbursement payments to rural hospitals by 10 per cent, and rebidding contracts with managed care companies.' Despite those cuts, there could still be a $150 million shortfall.

What went wrong: A manufacturing economy, with plants for Harley Davidson and General Motors, Wisconsin faces a similar situation to the well-known plight of Michigan. Cheeseheads lost a lot of revenue and jobs in the past few years. The state government has been notably unsuccessful, failing to balance the budget for five straight years before the recession even started.

Background

Pew score: 22
Revenue change: -11.20%
Unemployment rate change: +4.4
Foreclosure rate: 0.96%

See the full Pew report.

Budget gap source: Legislative Fiscal Bureau via CBPP

#9 Illinois

Total 2010 budget gap: $14.3 billion / per cent of General Fund Budget: 40.9%

What's getting cut: As the Wall Street Journal notes, Illinois routinely covers gaps with short-term measures instead of cutting costs, putting off bills for social and other services and paying less than is recommended into the state's pension fund. Because of that, the state has run a deficit every year since 2001.

That's happening again as the 2010 race for governor is delaying substantial action. Some reductions have been made, but the gap has been plugged mostly by delaying some $4.5 billion payments for state service providers, like nonprofit social service agencies, universities, community colleges, school districts and others.

What went wrong: Illinois's diverse economy has weathered the recession better than its Rust Belt neighbours. However, the state's fiscal policy has long been horrendous, and it's budget shortfall for 2010 is among the worst in the country. The Land of Blagojevich has not balanced a budget since 2001, when the government began a policy of putting off payment to Medicaid providers and other debtors, and subsequently borrowing money to stifle the growing backlog.

Background

Pew score: 22
Revenue change: -10.90%
Unemployment rate change: +3.5
Foreclosure rate: 1.44%

See the full Pew report.

Budget gap source: State budget/Voices for Illinois Children analysis via CBPP

#8 New Jersey

Total 2010 budget gap: $9.2 billion / per cent of General Fund Budget: 31.3%

What's getting cut: Newly-elected Governor Chris Christie has several options, including, as the Bergen Record notes, delaying up to $2.5 billion in pension obligations; cutting $1.6 billion in property tax rebates; significantly cutting back state programs; and saving $700 million by holding or eliminating planned program growth.

More cuts could come by scaling back eligibility for some government programs, potentially including Medicaid and other health-care programs and trimming state employee benefits, according to the Philadelphia Inquirer.

What went wrong: New Jersey's huge long-term debt has grown from years of excessive borrowing and eluded the efforts of politicians to reign it in through tax increases. The collapse of Wall Street was another significant blow to the Garden State economy.

Background

Pew score: 23
Revenue change: -15.80%
Unemployment rate change: +3.7
Foreclosure rate: 1.18%

See the full Pew report.

Budget gap source: Governor's office, New Jersey Policy Perspective via CBPP

#7 Florida

Total 2010 budget gap: $6.0 billion / per cent of General Fund Budget: 23.3%

What's getting cut: CBPP notes that state education grants to school districts and education programs have been cut, while tuition at all 11 public universities in Florida increased by 15% for the 2009-2010 school year. Florida also cut Medicaid reimbursements to hospitals and community-based services for the elderly, such as meals and homemaker services. There have also been some hiring freezes.

What went wrong: Florida's population is shrinking for the first time since World War II. This is bad news for an economy used to booming growth. First, they have to figure out what to do with thousands of uninhabited beachfront properties and the respective disappearance of a major industry. Second, the state has to find new ways to generate revenue, while dealing with obstacles like the constitutional absence of a personal income tax.

Background

Pew score: 25
Revenue change: -11.50%
Unemployment rate change: +4.4
Foreclosure rate: 2.78%

See the full Pew report.

Budget gap source: Revised revenue projections via CBPP

#6 Nevada

Total 2010 budget gap: $1.2 billion / per cent of General Fund Budget: 40%

What's getting cut: A major revenue package has already been enacted, which cut a variety of costs. There were reductions for adult Medicaid recipients; imposed furloughs and pay cuts for some state employees; and less welfare funds for low-income families to receive cash assistance and health insurance.

Schooling has also seen cuts, including to higher education operating funding and financial aid and various reductions to K-12 education, including delaying an all-day kindergarten expansion, cutting per-pupil expenditures by $400 in a pilot program, eliminating funds for gifted and talented programs and a magnet program for students who are deaf or hard of hearing, according to the CBPP.

The governor has warning more cuts could come, including possible layoffs, extended furloughs and shortened workweeks, according to the Associated Press.

What went wrong: Another state without an income tax, Nevada makes the majority of its revenue from gambling and sales taxes. But it's been a bad year for Vegas, with fewer tourists, and most of them spending less money. Nevada also suffers from the highest foreclosure rate in the country.

Background

Pew score: 26
Revenue change: 1.50%
Unemployment rate change: +5.2
Foreclosure rate: 3.12%

See the full Pew report.

Budget gap source: Division of Budget and Planning/Board of Examiners and May Economic Forum via CBPP

#5 Oregon

Total 2010 budget gap: $4.2 billion / per cent of General Fund Budget: 29%

Note: Oregon has a two-year budget, so the size of the combined shortfall before budget adoption for FY10 and FY11 is shown here.

What's getting cut: Oregon has already imposed furloughs and pay cuts for some state employees and cut state education grants to school districts and education programs, but the real pain could still come.

There's a special election on Jan. 26th about $727 million in increased taxes for businesses and high-income earners, the approval of which would simply maintain services at 2007-2009 levels, according to the Statesman Journal.

If not, the state will have a much larger hole to plug, and public safety, health care, social services and education could see cuts.

What went wrong: Oregon has seen a greater increase in unemployment than anywhere in the country. This is a huge problem for a state government that relies primarily on income tax for revenue. Unless the government is able to implement a sales tax -- which voters have already rejected nine times -- the Beaver State will be hostage to volatile (falling) timber and tech industries.

Background

Pew score: 26
Revenue change: -19.00%
Unemployment rate change: +6.4
Foreclosure rate: 0.86%

See the full Pew report.

Budget gap source: Joint Committee on Ways and Means via CBPP

#4 Michigan

Total 2010 budget gap: $2.8 billion / per cent of General Fund Budget: 12.4%

What's getting cut: Michigan has been aggressive in cutting costs, but still faces a bleak financial picture.

As CBPP notes, Michigan's recently passed budget included an overall reduction in financial aid programs; funding for university operations; and school aid for K-12 programs. The state also reduced funding for Medicare; imposed some hiring freezes, furloughs and pay cuts; and cut money to localities.

What went wrong: It doesn't seem like a good time to raise taxes on the people of Michigan. The Auto State already leads the country in unemployment and approaches the worst in terms of foreclosures, lost revenue, and per-capita income. But the state government desperately needs new revenue, with a tax code that gives breaks to many sorts of individuals, companies, and sales.

Background

Pew score: 27
Revenue change: -16.50%
Unemployment rate change: +6.0
Foreclosure rate: 1.47%

See the full Pew report.

Budget gap source: Consensus Revenue Forecast, Michigan League for Human Services via CBPP

#3 Rhode Island

Total 2010 budget gap: $990 million / per cent of General Fund Budget: 32.2%

What's getting cut: Rhode Island is still deciding how to deal with its large budget deficits, according to the AP, including raising taxes, but some cuts have already been made.

On health care, the state is requiring low-income elderly people to pay more for adult daycare; eliminated health coverage for 1,000 low-income parents; and reduced the maximum income level at which parents can receive public health insurance.

Rhode Island has cut funds for affordable housing, eliminated health insurance for home-based child care providers, restricted TANF cash assistance for children, reduced health insurance for retired state workers, and cut support to localities by $10 million. That's on top of furloughs and pay cuts for some state employees.

Also, the state has cut aid for K-12 education and reduced the number of children who can be served by Head Start and similar services; higher education operating funding and financial aid has also been reduced.

What went wrong: How did the smallest state in the union tie with California for the worst fiscal policy grade? The state has failed to slow the demise of a powerful manufacturing industry -- 95,000 jobs in 1990; 48,000 jobs in 2008 -- and it simultaneously failed to attract significant new industries. As a complement to poor economic development, the state has long produced sloppy budgets, resulting in high taxes and consistent deficits.

Background

Pew score: 28
Revenue change: -12.50%
Unemployment rate change: +4.5
Foreclosure rate: 1.50%

See the full Pew report.

Budget gap source: Press reports of Revenue Estimating Conference/House Fiscal Advisory Staff, via CBPP

#2 Arizona

Total 2010 budget gap: $5.2 billion / per cent of General Fund Budget: 53.0%

What's getting cut: Approximately $650 million of of emergency spending cuts and other midyear changes have already been approved.

As the Associated Press summarizes, that includes layoffs, furloughs and pay cuts for thousands of state workers, closures of state parks, reduction of funding for schools to purchase books and computers and eliminations and reductions of social programs ranging from day-care subsidies to temporary welfare for disabled adults.

What went wrong: Already suffering from a massive housing bust, Arizona is beleaguered by stringent political rules written during the boom era. For instance, voters at the turn of the millenium imposed mandatory spending levels for schools and greatly expanded eligibility for Medicaid. Likewise, the state faces structural obstacles to changes in the tax code -- which is poorly adjusted to generating revenue during a recession.

Background

Pew score: 28
Revenue change: -16.50%
Unemployment rate change: +3.0
Foreclosure rate: 2.42%

See the full Pew report.

Budget gap source: Joint Legislative Budget Committee, Financial Advisory Committee, via CBPP

#1 California

Total 2010 budget gap: $51.8 billion / per cent of General Fund Budget: 56.2%

What's getting cut: It seemed like California's financial problems couldn't get any worse than the summer 2009 budget crisis. It is.

On health, California is increasing the costs borne by families of nearly 1 million children that participate in its healthy families CHIP program. The state has dropped coverage of dental and/or vision services for adult Medicaid recipients. And it has capped or reduced funding for programs that serve people who have disabilities or are elderly. That's on top of eliminating cost-of-living adjustments to cash assistance programs for low-income families and cutting child care subsidies.

There have been significant cuts to school aid, prompting the University of California to increase tuition by 32%. California is also reducing K-12 education aid to local school districts by billions of dollars. It also is cutting a variety of other programs, such as adult literacy instruction, and is reducing funding for some grants and programs aimed at helping high-needs students, according to CBPP.

California has also imposed furloughs and pay cuts for some state employees, plus there's a hiring freeze.

Strapped for revenue, Democrats are likely to fight with Republicans over tax increases, but that could mean another stalemate, according to the Associated Press (California has been unable to adopt prison and health care cuts it passed in the last budget).

What went wrong: Balancing the budget of the tenth largest economy in the world has lately seemed impossible. Blame it on the six factors included in the Pew report. California was a centre of the real estate bust, with subsequent high rates of foreclosure on homes. Unemployment shot up at a sharp rate. Tax revenues tumbled. Efforts to balance the budget or raise taxes were squelched by voter-imposed restrictions, including supermajority requirements for any such changes. Finally, 'D+' policy-makers have continued to increase spending since 1990 at a faster rate than state population and inflation. Fortunately, California has been dealing with this kind of chaos for a long time.

Background

Pew score: 30

Revenue change: -16.20%
Unemployment rate change: +4.6
Foreclosure rate: 2.02%

See the full Pew report.

Budget gap source: Governor's budget, Legislative Analysts Office, Dept of Finance, Controller via CBPP

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