Governors' Gathering Hears That Worse Deficits Are Coming

The nation's governors have seen the future of state finances, and that future looks poor. That was the word from Vermont Governor Jim Douglas (pictured) at this weekend's opening press conference of the winter meeting of the National Governors Association. "The situation is fairly poor for a lot of states around the country," Reuters quotes Douglas, the current chairman of the group, as saying. "In fact, most states."The governors reviewed a report based on preliminary findings by 45 state treasurers that showed states face widening budget gaps despite deep spending cuts.

In 2011, the total deficits of those 45 states are expected reach $53.6 billion, the report concludes, and it predicts deficits will rise to $61.6 billion in 2012. "Economists have declared the national recession over," Reuters quoted Douglas as saying. "But for those who are still unemployed, for those who have lost their homes, it's clear that as a nation we have a long way to go."

The report is yet another indication that, despite those economists who say the recession has ended, its effects are not over and may linger for years. The deficits that the states face are not unlike those of the federal government, but the U.S. Treasury has ready access to the global capital markets to raise money through bond auctions, whereas all states but Vermont have laws that require them to balance their budgets each year.

Making Bad Problems Unsolvable

While few states face the deep trouble that California does, the financial woes of the nation's most populous state demonstrate how bickering among politicians amid falling state revenues can lead to problems that are nearly unsolvable. Unions for state workers continue to press, in many cases, to keep compensation for their members at current levels.

It's unlikely that any of the 50 states will go into receivership as some municipalities have, but many are likely to find that the only way to close their yawning budget gaps is to turn again to the already overburdened federal government. Much of the money from the national stimulus package is aimed at improving states' finances, but so far, there isn't not much evidence that it's helping.

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