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Pew report: nine states join California in facing fiscal crisis

Ten states from Arizona to Oregon now face a fiscal crisis, says a Pew report. Some economists say additional stimulus is needed to soften the economic impact of impending state budget cuts.

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In the past six decades, state and local governments have never seen the kind of tax-revenue collapse they are now experiencing, Mr. Zandi said.

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The study by the Pew Center, while not framed as a case for more federal stimulus, fleshed out the portrait of states in fiscal turmoil.

It identified 10 "most troubled" states, with California's budget woes already well publicized. The report is accompanied by a map of the whole country, showing which states are most or least like California.

The other nine in most trouble are: Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin.

These states face one or more of the following challenges:

Unbalanced economies. States that depend on a particular industry or two, such as automobiles or home construction, can be at greater risk in recession.

Budgets out of kilter. The recession puts almost all states in a bind, but California, Illinois, Michigan, New Jersey, Rhode Island, and Wisconsin have a history of persistent shortfalls, the study said.

Limited ability to act. In Arizona, California, Florida, Nevada and Oregon, the ability to raise taxes or cut spending is limited by their state constitutions, ballot measures passed by voters, or other legal impediments, the Pew researchers found.

Putting off decisions. The study said that lawmakers "punted" responsibility in California, Illinois, and New Jersey. They passed responsibility to state voters or governors to make tough calls, or used borrowing or accounting methods to put off tough budget decisions.

Across the nation, states will have to raise taxes or cut spending and jobs whether or not Washington provides additional stimulus. The case for stimulus, backers say, is that it may help minimize the chances that the economy will slip back into recession before private-sector job growth is moving again.

Some economists, however, argue that stimulus is either not needed or would be counterproductive, because it adds to the federal government's own fiscal burden.


See also:

Post-Depression first: Americans get more money from government than they give back


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