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New Governors face tough times. (Commentary).(Alice Rivlin's proposals to bolster state economies should be debated)

Government Finance Review

| December 01, 2002 | Peirce, Neal R. | COPYRIGHT 2002 Government Finance Officers Association. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)Copyright

Tuesday's victorious gubernatorial candidates may soon be wondering if the voters did them a favor.

Barring some kind of economic miracle, the fiscal outlook for the states is dreary in the extreme. And it's likely to stay that way not just for months, but for years.

The most obvious victims are those most dependent on state aid--the working poor and former welfare recipients classically the "last to hire, first to fire." But from universities to road systems to local governments denied basic state aid, there's hurt for virtually everyone.

Even worse, says former federal Budget Director Alice Rivlin, the massive budget cuts states are making are actually destabilizing the entire national economy, delaying everyone's recovery.

The total fiscal gap for the states this year was at least $57 billion. And even before recent news the economic recovery may be stalling out, the states were looking at greater budget squeezes next year.

Why?

Already, the states have resorted to the least painful cures they could find-dipping into (and sometimes exhausting) their rainy day funds, freezing new hires, delving into tobacco settlement moneys. Many have cut outlays for corrections, schools, colleges, local aid, childcare, and Medicaid--even while they and their localities face new homeland security costs.

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