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DESPITE U.S. ECONOMIC GROWTH, SOME STATES FACE BUDGET SHORTALLS
© Krantz News Service, January 5, 2015
Although the U.S. economy grew at annual rate of 5 percent in the third quarter,1/ many states face a budget squeeze as most legislatures convene this month.
Thirty-one states now have Republican governors and more than two-thirds of legislative chambers nationwide are under GOP control. Nebraska has a nonpartisan, unicameral legislature.
Yet budget concerns cross partisan lines. In one state where Republicans have a new governor, and in another state still solidly under Democratic control, unfunded liabilities are very much in the public mind.
Illinois is the state with the lowest credit rating of all 50 states. 2/ As Marketplace.org reports, "Illinois also has a divided government: a newly-elected Republican governor Bruce Rauner who campaigned against making the state's temporary income tax increase permanent, an unfunded pension liabilities of about $100 billion (or possibly more), and a solidly Democratic state legislature." 3/
California is another state which has languished near the bottom in state credit ratings, but its score has improved in the wake of voter approval of a "rainy day" (reserve) fund.
The vote gives California "a strengthened budget stabilization account," Standard & Poor's credit analyst David Hitchcock said in a statement. 4/ "In our view, the new state constitutional provision will partially mitigate California?s volatile revenue structure by setting aside windfall revenue for use during periods when state tax revenue could fall materially short of forecast."
California's unfunded pension liabilities, at around $200 billion, are well known, largely because the state's outgoing state controller, John Chiang, has been completely open about the figures. 5/ Chiang, who was term limited in that position, was elected state treasurer in November; he has also called attention to the state's unfunded health care crisis. 6/
Unfunded liabilities are not the only focus among budget watchers. The dramatic drop in oil prices has stimulated the national economy, but it may cause a budget squeeze in some states. 7/
As gas prices drop in Oklahoma, one state lawmaker estimates a budget shortfall in that state of between $200 and $300 million. 8/
Lawmakers nationwide will address budget and nonbudget issues beginning this week as legislatures convene.