Welcome to Fiscal Year 2009

Today's the day. July 1st is the day when 46 states begin Fiscal Year 2009 and 29 states and the District of Columbia will be facing a combined budget shortfall of $48 billion according to the Center on Budget and Policy Priorities. And because the federal government still hasn't gotten around to assembling a fiscal package to help the states, many economic dominoes are about to fall.

So what are some of the casualties of the FY 2009 budget balancing?

Tapping out the reserve fund. I wrote about it a month ago and it remains true today; states are being forced to raid their reserve funds. Business Week doesn't think this is a great idea:

But in many cases they're tapping out the reserve funds for the coming budgets and might need to make tougher choices when they put together their 2010 spending plans, especially if the economy worsens.

Massive health care costs Many states have been forced to consider slashing health care budgets. The Sacramento Bee paints the picture for California residents if the Governator and the state Senate's "compromise" on health care is passed:

To save $92 million in the budget, Schwarzenegger wants to reinstate a rule that families on Medi-Cal submit paperwork every three months to prove their eligibility, instead of every 12 months.

About 150,000 children are expected to lose coverage this year - and 470,000 eventually - because their families either fail to file the required forms or they can't meet the program's eligibility rules.

School budgets in a state of flux. Highly touted increases in education are in flux as states recognize the true weight of their budget shortfalls. State lawmakers in Illinois increased the minimum spending on each student by $225, but according to the Chicago Daily Herald the Governor may not be able to deliver on this promise:

The governor has already publicly threatened to slash $1.5 billion and order agencies to hold back another $500 million to balance spending unless lawmakers return to Springfield and come up with more money.

This would include a $110 million cut in education spending. Illinois is not alone. Nevada just passed a bill that cuts school textbook spending by $48 million.

More criminals on the street. Sky rocketing gas prices combined with a tightening of the budget belt has led to impossible decisions for law enforcement agencies. Not everyone can simply have officers walk their beats to save money. In places like sprawling El Paso County their only option is leaving more criminals on the streets:

(Sheriff) Maketa initially switched to two deputies per car. Then he forbade idling vehicles. Neither led to big enough savings. This month, he decided to end all patrols to save money, though he predicts his deputies will catch fewer drunken drivers and fewer suspects with outstanding warrants. The department will reassess the end of patrols if it finds there is a serious effect on public safety.

Today will not mark the date of some apocalyptic change in the American way of life. The average American citizen probably didn't wake up today with more criminals roaming the streets, no health care, and their kids attending a dilapidated run down school. Unless of course they are one of too many Americans who faced these conditions even before the economy began to sink.

Gradually though things will come into focus.I wrote last week that the deeper the economic hole, the more federal spending will be required to help us get out of it. Well today's the day we start stepping into that $48 billion hole.

There's more...

Hey Chairman Obey, The Recession's Over Here

As the economy worsens, more and more key players are getting on board with the idea of a second economic recovery package. But not everyone's where we need them to be to get something done in time to matter. For example Rep. David Obey (D-WI), powerful chairman of the Appropriations Committee free associated to Congress Daily (subscription only) and revealed that he doesn't quite get how urgent doing something to stave off this recession is:

"People use a kinds of terminology; I don't care if you call it a second supplemental or a second economic [stimulus] package -- to me there are all kinds of things that we need domestically -- but we need finish this job [war supplemental] before we can start thinking about the next one"

This pains me. Not only are House Democrats punting on telecom immunity, they're putting war spending ahead of domestic spending.

Bush's first economic stimulus package just didn't work. We didn't get the big sweeping surge of economic growth we were promised. Even what good news we've gotten was drowned out by a chorus of  story after story of bad economic news. The costs of living are growing rapidly as employment becomes harder to find. Food is getting more expensive as food bank lines grow longer. The longer Congress waits to act, the worse things will get.

And the states can't wait for the aid that Democratic leaders say must be included in a second stimulus package either. State spending is the last prop holding up the economy and is at a tipping point. More than half of the states are facing crippling budget shortfalls that total $48 billion for the upcoming fiscal year. In the absence of aid from the federal government, states have been forced to cut vital services for many of our most vulnerable citiznes. The Center on Budget and Policy Prioritiesgives outlines the chopping block:

At least 12 states have implemented or are considering cuts that will affect low-income children's or families' eligibility for health insurance or reduce their access to health care services.

At least 10 states are cutting or proposing to cut K-12 education; three of them are proposing cuts that would affect access to child care.

At least 11 states have proposed or implemented reductions their state workforce. Workforce reductions often result in reduced access to services residents need.

And when states are forced to do things like cut their state workforce, the economy suffers even more. According to CNN/Money:

With falling revenue from sales and income taxes, and property-tax declines looming, states, cities and towns have already laid off tens of thousands of government employees. Many expect more job cuts ahead as public officials struggle to balance their budgets.

Economists say that cutbacks in jobs and spending by local governments could be a major drag on the overall economy.

It's cool that Obey recognizes the need for a  second stimulus package. But he also needs to understand that each day he lets pass without doing something means the economic hole we're in is that much deeper and is going to require that much more federal spending to help us get out of.

There's more...

House on the Verge of Addressing the Recession?

On Thursday the Labor-Health and Human Services-Education Appropriations Subcommittee is considering a funding bill for key domestic programs and services under those federal departments.

Hopefully, the Subcommittee will approve a $781 million increase in the Employment Service -- basically the people who connect those needing work with those who need work done. This is exactly the kind of stuff that's critical in a recession.

Unsurprisingly, the Bush Administration is seeking to gut employment services. This bit of wanton stupidity is a nice bookend to the White House's unwillingness to extend unemployment benefits.

Progressive groups are also seeking an $874 million increase for Child Care and Development Block Grant, funding which the Bush administration wants to freeze for a 7th consecutive year. Of course, this will have consequences for real kids:

Years of flat funding have already resulted in 150,000 fewer children receiving assistance." At this rate, it is projected that 300,000 fewer children will receive child care assistance by 2010. The harsh reality is that parents "may have been forced to go into debt; return to welfare; choose lower-quality, less stable child care; or face untenable choices in their household budgets."

Finally the Subcommittee will hopefully approve a $350 million allocation for emergency preparedness in the event of a pandemic flu outbreak. If there's anything we know about a potential pandemic flu outbreak it's that we are not adequately prepared for it. As DemforCT has warned us at dKos.

Numerous groups are mobilizing supporters to encourage the Labor-Health and Human Services-Education Subcommittee to support the $781 million increase to the Employment Service, the $874 million increase in Child Care Development Block Grants, and the $350 million allocation for emergency preparedness.

AFSCME is collecting signatures for a petition in support of a $781 million increase to Employment Services, an $874 million increase in Child Care Development Block Grants, and a $350 million allocation for emergency preparedness.

Sign it. The country's in recession and the federal government needs to get the safety net unfurled before we all go splat.

There's more...

Historic Rise in Unemployment Highlights the Need for Federal Action

I wrote earlier this week about a potential crisis involving unemployment benefits. The post demonstrated the need for the federal government to inject money into state unemployment trust funds whose coffers are close to empty because of the terrible state of the economy.

If further evidence was needed,today's Washington Post brings it with news that the unemployment rate jumped to 5.5% in May, a .5% increase over April. According to the story:

The jobless rate was 5.5 percent in May, the Labor Department said, up from 5 percent in April. That is the largest climb in a single month since 1986. Employers also slashed 49,000 jobs from their payrolls, the fifth straight month of losses.

...

The spike in joblessness was so large as to suggest something more fundamental is going on. In addition to young people, the jobless rate rose among almost every other group -- men, women, blacks and whites. The rate was unchanged among Latinos.

All signs point to the situation continuing to trend downward:

"Today's events are a combination of really nasty news for American consumers," said Andrew Tilton, a senior economist at Goldman Sachs.

"This is very startling," said John Silvia, chief economist of Wachovia Corp. "This is not going to be a quick situation where, we passed the [stimulus bill], now the economy is back to normal. We have a subpar economy."

"This spike in unemployment is entirely consistent with a large spate of other indicators having to do with the job market and the economy," said Jared Bernstein, a senior economist at the Economic Policy Institute..."It's crystal clear that the economy is not generating the job and income growth people need to maintain their living standards," said Bernstein.


There's more...

The Great Earmarks Charade

There's an essential beast in politics which is the bastard child of scapegoat and smokescreen. (Please don't overthink!)

Where it's absolutely necessary for a pol to admit having made a mistake - and, let's face it, it comes about as easily as saying sorry did to the Fonz - they'll choose something (or someone) small to blame, something severable, which, post-chop, which, with any luck, will leave the main body politic (not to mention their own!) clean of all taint.

They will use extravagant gestures over this relatively minor matter both as displacement activity and as misdirection: they'll occupy the minds of pols, media and public with the scapegoat, in order to stop their attention wandering to more serious, radical, intractable, dangerous matters.

Such is it with earmarks.

There's more...

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