The most dangerous states to live in right now, at least fiscally-speaking, are:
California. California is the poster child for states in trouble. There have been mandatory furloughs for state workers, school aid slashed, teacher layoffs and the infamous IOUs that were going for 60 cents to the dollar at the worst point. There is a $6 billion budget gap and it’s estimated that this will climb to $20.7 billion before the tide turns.
Oklahoma. Drop in oil and natural gas prices has created a sudden budget gap for this state that never expected a problem. Revenues for the first quarter of the fiscal year were 26 percent below the estimates.
Arizona. There are rumblings that Arizona may start printing IOUs for workers starting in February 2010, ala California. Arizona is one of the states that was hit worst and earliest by the housing crisis. Lawmakers are forecasting a 30 percent budget gap in the next fiscal year.
Illinois. Illinois is looking at a deficit gap of at least $11 billion. There are rumors that pension payments may be compromised.
Hawaii. Hawaii has acted strongly to try to pull back the deficit. There have been three-day-a-month furloughs, a reduced school year, and an income tax. But it’s not working. Hawaii faces a shortfall of 13 percent since the fiscal year began in June, and is projecting a 21-percent gap for the next fiscal year.
New Jersey. The state has the third-highest projected budget shortfall for FY2011 (behind Nevada and Arizona) – 27.5 percent. The state’s unemployment fund is forecast to have a $1.2 billion deficit within three months, and will trigger a controversial automatic tax increase on employers.
New York. The state already has a $3 billion budget gap (6 percent) since its fiscal year began in July, which is expected to double by the next budget.
Nevada. One of the hardest hit by the housing crisis, the state faces a projected shortfall of 33 percent for its next budget year. The good news is that the legislature has already approved actions to close that gap. But, we’ll see how effective they are in the long run.
Colorado. The governor has proposed big cuts to try to eliminate a budget gap of at least 10 percent next fiscal year. Efforts to balance the budget are hobbled by laws that limit state revenue and require annual increases in K-12 spending.
Michigan. Michigan entered the recession long before any other state, and has continued to suffer as the auto industry gets hammered. Currently, unemployment is 14.7 percent – the worst in the nation – though it’s stabilizing.
And, ironically, the economic stimulus money may have actually worsened the situation, by setting up programs with funding for one year only. After the year is up, there will be another shoe to drop as unemployment, medical, job training and other programs are left cold with no money.
All of this leads to be one big issue – states are going to get more aggressive in determining who is subject to their tax and in collection. Look out!