Muthusamy SELVARAJU,
The article is, generally speaking, spot on...
In the '90s, our state governments spent furiously and recklessly, especially on projects or social reform programs that would require repetitious (nay, ever increasing) spending to fund these programs well into future generations. At the same time, lawmakers also cut revenues (mostly in the form of taxes) to the bare bones, in order to display to their respective electorates that they were being fiscally conservative while meeting the needs of the states' residents.
When the tax dollars stopped gushing into state coffers starting around 1999, various states were caught with their trousers down somewhere around their ankles.
Revenues decreased/expenses increased for myriad reasons:
1) States like Arizona, that base their income taxes on the Federal income tax filing, found that when the Federal government cut income taxes to stimulate the economy (remember the great rebate checks?), their own revenues were slashed as well.
2) Job losses and layoffs cut severely into state income tax revenues, while at the same time increasing the demands upon the various social support programs that the states offer.
3) The Federal government (in essence) balanced parts of the federal budget by transferring the expenses of running various programs from a federal responsibility to a state responsibility. Along the same lines, judicial decisions and new federal laws force states to to pay for social services to classes of people that had been previously excluded from those programs. (Especially hard hit in this area are the so-called border states that now must fund health care, education and a host of other programs for illegal immigrants, and others that remain in the country beyond legal time limits.)
4) In the late '80s throughout almost all of the '90s, states were blessed with abundant taxes collected from taxpayers that were enjoying huge taxable gains from their stock market investments. When the gains stopped being realized, the windfall for the states abruptly stopped. Worse yet, gains are now losses, and taxpayers are deducting their losses from their state and federal returns, further reducing state revenues.
5) Many programs funded by the states turned out to be expensive boondoggles, so in effect, many of the tax dollars collected during the boom years were merely flushed down the commode.
6) Energy costs skyrocketed, adding huge additional and unplanned for expenses to state budgets.
In short summation, unrealistic over-spending, unrealistic tax cuts, and (collectively speaking) extremely incompetent legislators came together to create a crisis for the states that has no easy answers and will be very painful for years to come. The states are only in the very infancy stages of this current fiscal crisis. The worst (much worse) is yet to come.
KJC |
