Next shoe to drop: states go bankrupt

9-8-08sfp-f1As the recession continues to worsen, the next shoe to drop will be state bankruptcies.

We all know about California’s budget woes, but that’s just the tip of the iceberg.

“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,” according to the Center on Budget and Policy Priorities. “Combined budget gaps for the remainder of this fiscal year and state fiscal years 2010 and 2011 are estimated to total more than $350 billion.”

At least 41 states have looked ahead and anticipate deficits for fiscal year 2010 and beyond, according to the group.

Job cuts and furloughs will just exacerbate the problems, putting more people on the street and straining the system. Unemployment in the state and county is expected to creep to 10 percent.

Structural changes in government are needed to get out of the woods — a difficult challenge. Even furloughs, the least painful step, are being fought tooth and nail in California.

It shows how clueless some government workers are about the problems we face.

Our area is so close to the debacle in Sacramento that we can’t help but be impacted: tourists who shop here, and the county being sucked into the vortex of the state’s budget woes (my 1/31 blog post).

Meanwhile, as we sit on our hands, the Dow continues to slide below 8,000. Our retiree’s “nest eggs” continue to diminish, putting a crimp in local spending.

Wish we’d done a better job of diversifying our economy, and more people around here would “get it” that pinning your economy on tourism and retirees makes you vulnerable.

To follow the government financial troubles, go to Center on Budget and Policy Priorities. It’s a good resource.

Author: jeffpelline

Jeff Pelline is a veteran editor and award-winning journalist - in print and online. He is publisher of Sierra FoodWineArt magazine and its website Jeff covered business and technology for The San Francisco Chronicle for 12 years, and he was a founding editor and Editor of CNET News for eight years, among other positions. Jeff has a bachelor's degree from UC Berkeley and a master's from Northwestern University. His hobbies include sailing, swimming, and trout fishing in the Sierra.

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