State and Local Budgets Hinge on Economic Recovery

By Davidson, Charles | EconSouth, Summer 2009 | Go to article overview

State and Local Budgets Hinge on Economic Recovery


Davidson, Charles, EconSouth


As spring inched toward summer, sinking revenues and rising demand for services weighed on local and state governments across the Southeast. Residential and commercial property values have stagnated or fallen, unemployment is up, and worried consumers and businesses have reduced spending. Like a kink in a garden hose, those nasty economic realities have pinched the largest revenue streams that feed the Southeast's states and municipalities-taxes on income, real estate, retail sales, and property sales.

State and local governments in the Southeast, like those in the rest of the nation, are facing difficult budget choices as the economic recession continues to take a toll on important sources of government revenue. Several states braced for further budget cuts at public universities. Counties and cities across the Southeast closed libraries. Georgia whittled dollars from a scholarship program for high school valedictorians, and state departments left vacant jobs open. Southeastern cities laid off and furloughed employees, even police officers. Atlanta's $4 billion water and sewer system overhaul was imperiled as the city's credit rating hovered just above junk-bond status.

Most U.S. states--including all six Southeastern states-have constitutional or statutory requirements to balance their budget, and most of these states are prohibited from carrying over a deficit into the next fiscal year, according to the National Conference of State Legislatures. Faced with these restrictions, every Southeastern state and many cities and counties have been forced to either increase taxes and fees--a dicey political proposition when many citizens' finances are hurting--reduce costs and services, or draw on reserves. Most have drawn down rainy day accounts and cut programs while, to a lesser degree, increasing fees and taxes on items such as cigarettes.

As bleak as the fiscal picture looks for the region's state and local governments, some short-term relief could be on the way--the American Recovery and Reinvestment Act of 2009, the federal economic stimulus program. Florida, for instance, plans to use about $3 billion of Recovery Act funds to help make up some of its $5 billion-plus budget shortfall for the July 2009-June 2010 fiscal year, according to the state.

After stimulus grants are spent, however, the fiscal health of Southeastern states will depend heavily on the strength of an economic recovery, said Navnita Sarma, a Federal Reserve Bank of Atlanta economic research analyst who tracks state government finances. A powerful, rapid rebound would quickly generate higher sales and income taxes, and presumably, though more gradually, strengthen property values and thus property tax revenues that are vital to local governments. In a tepid recovery, tax collections would rise more

[ILLUSTRATION OMITTED]

"The states are all tightening," Sarma said. "They're looking at every component of their budgets. How their economies recover will have a huge effect on their fiscal outlook."

Government work feeling the pinch

Federal, state, and local governments are a significant part of the Southeastern economy. At the end of March, the region's 3.28 million public sector jobs accounted for 17 percent of nonagricultural employment, according to figures from the U.S. Bureau of Labor Statistics (BLS).

And so far, at least, jobs in the government sector have been more secure than jobs in the private sector. In the 12 months through April, while overall nonfarm employment in the Southeast declined 4.2 percent, by 843,500 jobs, government employment nudged lower by only 0.04 percent, or 1,400 jobs, according to BLS data.

Public sector employment declined from April 2008 to April 2009 in Alabama, Florida, and Georgia and increased slightly in Louisiana, Mississippi, and Tennessee. Meanwhile, every state lost private sector jobs during the same period.

While federal stimulus funds should salve some of the immediate fiscal pain, determining the longer-term implications of budgetary problems for the Southeast's governments is difficult, Sarma said. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

State and Local Budgets Hinge on Economic Recovery
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.