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Monday, February 16, 2009

State Budgets: No Progress in California, Kansas Suspends Income Tax Refunds

by Calculated Risk on 2/16/2009 06:42:00 PM

From the WSJ: California Legislators Reconsider Plan to Close $42 Billion Budget Gap (ht Dwight)

California legislators met Monday to reconsider a proposal to close the state's $42 billion deficit after aborting a vote late Sunday ... that would raise taxes and cut spending. ...

The budget put up to vote during the long-weekend session outlined spending for the next 17 months. In addition to the revenue increases, it proposed cutting $15 billion in spending, including $8.6 billion from education and $1.4 billion from payroll costs, to be achieved in part by furloughing 200,000 state workers at least one day a month.
The impasse has revolved around a bill, out of the nearly 30 in the budget proposal, that would generate $14 billion in revenue by temporarily raising the sales tax by one percentage point, by increasing the gasoline tax by 12 cents a gallon and by adding a surcharge of up to 5% on income taxes, among other steps.
And from the AP: Kan. suspends income tax refunds, may miss payroll (ht Mark)
Kansas has suspended income tax refunds and may not be able to pay employees on time, the state's budget director said Monday.

The state doesn't have enough money in its main bank account to pay its bills, prompting Democratic Gov. Kathleen Sebelius to suggest transferring $225 million from other accounts throughout state government. But the move required approval from legislative leaders, and the GOP refused Monday.
There are just 2 of 46 states that the Center on Budget and Policy Priorities is facing a shortfall (of course California has the largest shortfall): State Budget Troubles Worsen
States are facing a great fiscal crisis. At least 46 states faced or are facing shortfalls in their budgets for this and/or next year, and severe fiscal problems are highly likely to continue into the following year as well. ...

States are currently at the mid-point of fiscal year 2009 — which started July 1 in most states — and are in the process of preparing their budgets for the next year. Over half the states had already cut spending, used reserves, or raised revenues in order to adopt a balanced budget for the current fiscal year — which started July 1 in most states. Now, their budgets have fallen out of balance again. New gaps of $51 billion (over 10% of state budgets) have opened up in the budgets of at least 42 states plus the District of Columbia.