Why State Budgets Matter

Following up on California’s status as an economic disaster-hole, it begs the question of “why do state budgets matter?” Frankly, the long and short of it is if your state is broke, then by law they’re required to not be broke. The result is higher taxes and cuts. Because most governments are incapable of thinking rationally, they usually start cutting education, police, healthcare, etc. You know, the things people use and actually hired the government to deal with.

When they raise taxes, that lowers demand for services as people have less money, businesses have less funds for payroll and supplies and they cut wages and staff and, voila, you have a deeper recession. Not to mention that states cut contracts with outside vendors, thereby deepening matters more.

Again, I’m going to re-iterate that this governing things isn’t necessarily hard. Mitch Daniels saved money by buying floor mats for heaven’s sake:

[Daniels ended] bottled water for employees of the Bureau of Motor Vehicles (annual savings, $35,000). Ending notification of drivers that their licenses are expiring; letting them be responsible for noticing (saving $200,000). Buying rather than renting floor mats for BMV offices (saving $267,000 this year). Initiating the sale of 2,096 surplus state vehicles (so far, $1.95 million in revenue from 1,514 sales). Changing the state lottery’s newsletter from semimonthly and in color to a monthly and black-and-white (annual savings, $21,670).

Note, this was in 2005 after 1 year in office. I’d also mention that I’d go as far as to eliminate newsletters, period. Who reads newsletters!? Get a website!

And, the BMV now reminds people about expiration notices electronically, for practically nothing, via email for Hoosiers enrolled in MyBMV.

States have money to burn and money that can be saved and refunded to taxpayers. They just need to step up and deal with it. Don’t tell me the Feds don’t have a few newsletters that can be chucked.

California Now Officially Worse than a Developing Country

Just in from the West Coast:

California’s debt is seen by investors as riskier than Kazakhstan’s, according to Bloomberg News. Five-year credit default swaps tied to California’s debt, which are a key measure of the market’s belief in the likelihood of default, are actually trading at 100 basis points above those of Kazakhstan. In other words, the market believes a developing country of just 15.7 million people is actually less likely to default on its debt than California, which makes up the eighth-largest economy in the world.

…

And last week, Jamie Dimon, the CEO of JPMorgan, the nation’s second largest bank, warned that California’s $20 billion budget gap could pose a bigger risk than the Greek debt crisis.

In other news, here in the Midwest, where rational people live:

During the fat years of the mid-2000s, while most governors went on spending sprees, Indiana Gov. Mitch Daniels was trimming Indiana’s payroll, slowing the state government’s growth, and turning a $800 million deficit into a consistent surplus. Now that times are hard, his fiscal rigor is paying off: the state’s projected budget shortfall for 2011, as a percentage of the budget, is the third-lowest in the country.

Indiana is not California

Well. This sucks:

California may need a $7 billion emergency loan from the federal government to pay for “teachers’ salaries, nursing homes, law enforcement and every other state-funded service” this month, Gov. Arnold Schwarzenegger warns.

California is running short on cash, Gov. Arnold Schwarzenegger warns in a letter.

…

California State Treasurer Bill Lockyer issued a statement a day earlier saying because of the national financial crisis, California “has been locked out of credit markets for the past 10 days.”

Thankfully, I live in Indiana where we figured out a few years back how smart it was not to spend more than you take in with taxes and other revenue:

Credit rating agency Standard and Poor’s (S&P), citing Indiana’s “continued strong management” and economic development efforts, has raised the state’s issuer credit rating to AAA, the highest rating it assigns. State officials say it is the first time in history that Indiana has attained S&P’s top credit rating.

You know, you Californians can just come to Indiana and get away from your broke crap hole. Heck, come soon and you might even get two free years of education:

The Hoosier College Promise would be available to Indiana students from families who earn about $60,000 or less annually. They would receive two years of free tuition at Ivy Tech Community College or an equivalent amount of $6,000 to use for their first two years at another college or university that is recognized by the State Student Assistance Commission of Indiana (SSACI).

Governor Mitch Daniels will ask the next Indiana General Assembly to approve the Hoosier College Promise, a program that would provide Indiana high school graduates with more affordable access to higher education.