State governments lost almost a third of their revenue in 2009 led by investment losses in pension funds, increased spending on social programs such as unemployment benefits, and decreased taxes. The Census Bureau reported that government revenue dropped 30.8 percent between fiscal year 2008 and 2009, the Washington Post reported
While the stock market has improved the outlook for pension funds and tax collections have inched up, unemployment is still high and the majority of states have large deficits. The Center on Budget and Policy Priorities’ Nicholas Johnson predicted next year will be even more difficult for states.
“If you look at the gap between the cost of providing public services and the revenue available to provide them, it remains very large" he told the Post.
Total revenue for the states in 2009 was put at $1.1 trillion. A year earlier it was $1.6 trillion. The Census Bureau said it was the biggest drop since they began reporting on state finances in 1951, the New York Times said.
The biggest decline was $477 billion in money earned by pension and other state funds such as unemployment insurance. Nelson A. Rockefeller Institute of Government fellow Donald Boyd said that the losses were “truly astounding.”
“They don’t translate immediately into budgetary stress for states. But what does happens is through the wizardry of actuarial valuations, they will drive pension contributions by states and localities up considerably in coming years, and that’s true despite the good stock market of 2009, and the relatively good stock market of 2010,” he told the Times.
© 2014 Newsmax. All rights reserved.