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New state budget plans burdened by recession, pension costs

States have launched into their 2011 fiscal year saddled with many of the same state budget problems that they had the year before. Forty-six states have a fiscal year that starts July 1.

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California Gov. Arnold Schwarzenegger said 'unsustainable costs' are wreaking havoc on the state's budgeting efforts.

NEWSCOM/FILE

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Across the US, states have launched into their 2011 fiscal year saddled with many of the same budget problems that they had the year before: low tax revenues, high recession-related expenses, and uncertainty about how to pay for long-term costs such as retiree pensions.

Fully 46 states have a fiscal year that starts July 1.

America's most populous state, California, entered the new fiscal year without a finalized budget in place. New York is still scrambling to put in place a budget for its fiscal year, which started April 1. And in Illinois, burdened by a big pension shortfall, the state budget plan relies on new borrowing as the state's credit rating slides.

Pension woes are a nationwide theme, as states struggle with either chronic underfunding, the effects of recession on investment portfolios, or both. This suggests that budget pressures could persist, even once the economy moves back to higher ground.

"What is hurting California is the same thing that is hurting governments and the economies all around the world," Gov. Arnold Schwarzenegger said in a video address to Californians last week. The problem, he said, is "unsustainable costs" and not just the recession-related fall in tax revenues.

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