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Yard sale for cash-strapped states

Selling surplus property is better than raising taxes in a weak economy.

By William F. Shughart II / June 5, 2008

Oxford, Miss.

States have a big problem. Years of out-of-control spending along with today's economic downturn means they're facing up to $40 billion in red ink.

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Politicians, of course, are ready with their usual "solutions." But maybe they should consider a yard sale, instead.

Yard sales help homeowners dispose of unnecessary items and quickly raise cash in a pinch. Likewise, states have a great opportunity to sell off surplus assets to balance budgets without painful taxes, fees, and cuts.

Many states are sitting on valuable surplus real estate that could be sold to replenish their coffers. No authoritative list of such properties is available. But selling surplus property – such as an old artillery depot at the entrance to South Carolina's Charleston harbor, or the undisclosed $150 million in property that the New York Senate has eyed – would give states an immediate cash infusion while they ride out the economic slowdown. It would also relieve them of long-term maintenance obligations.

Yet few states seem to be taking the opportunity seriously.

Staring at a projected $15.2 billion deficit next fiscal year, California Gov. Arnold Schwarzenegger has proposed combining spending cuts with additional borrowing that would increase the state's bonded indebtedness by $3 billion. Following the lead of the many states that have "collateralized" the payments they receive from tobacco companies under the so-called Master Settlement Agreement, he also has asked for authority to sell to Wall Street the rights to $15 billion in future state lottery revenue.

Lawmakers elsewhere are leaning more toward tax and fee increases. The New York Assembly, for example, wants to raise $1.5 billion a year by increasing the top income-tax rate. Several states are considering new tolls on interstate highways, including I-70 in Missouri, I-80 in Pennsylvania, and I-81 in Virginia. And Mississippi Gov. Haley Barbour, facing a $90 million hole in the state's Medicaid budget, has submitted a plan to "consolidate" three separate hospital taxes.