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State and city budgets falling fast

Shortfalls are beginning to hit local government services across the country.

By Ron SchererStaff writer of The Christian Science Monitor / November 14, 2008

SOURCE: Center on Budget and Policy Priorities/Rich Clabaugh/STAFF


New York

The nation's economic downturn is now squeezing state and city budgets – a financial turn of events that is forcing many mayors and governors to join the growing group of people on their knees asking Congress for help.

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The sense of urgency has increased because states have seen their revenue fall sharply over the past two weeks. One early estimate puts the states' mid-year budget gap at $24 billion, double the estimate from the end of last month.

If Congress does not act soon on a fiscal stimulus package, states are warning of plans to lay off librarians, cut healthcare services, and ask unions to forgo raises. Some mayors are cutting recreational basketball leagues and mothballing housing projects. It's gotten so tough, the mayor of Trenton, N.J., Douglas Palmer, has had to demote firemen.

"There are problems everywhere," says Iris Lav, deputy director of the Center on Budget and Policy Priorities in Washington.

"The Feds need to step in because it's extremely difficult."

Ms. Lav's group estimates 41 states have faced or are facing budget shortfalls. By 2010, she estimates state deficits could ultimately hit $100 billion, or 13 percent to 14 percent of state budgets.

"The Feds must help before there is devastation of those budgets," she says.

However, mayors and governors are aware the politics of federal fiscal stimulus might prevent them from getting help right away. "Waiting for fiscal stimulus from Washington is an iffy prospect," said Gov. David Paterson (D) of New York at a press conference Wednesday. "It may not happen this year, it may take a while for it to happen in the new administration."

Washington observers say Governor Paterson is wise not to expect a check in the mail to solve his budget gap, which amounts to $47 billion over the next four years.

"I may be wrong, but just writing a check is unlikely," says Stanley Collender, a budget expert and managing director at Qorvis Communications in Washington. "But, there will be some assistance for states in some form whether it be a loan guarantee or the government buying their paper."

If the states had their way, they would like Congress to give them help in four areas: help with the growing number of people applying for Medicaid, more funding for the rising unemployed, help with the growing number on food stamps, and an injection of funds to jump-start infrastructure projects that are ready to go.