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Thread: Texas facing possible $25 billion budget gap

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    Default Texas facing possible $25 billion budget gap

    --snip--
    AUSTIN – Texas faces a budget crisis of truly daunting proportions, with lawmakers likely to cut sacrosanct programs such as education for the first time in memory and to lay off hundreds if not thousands of state workers and public university employees.

    Texas' GOP leaders, their eyes on the Nov. 2 election, have played down the problem's size, even as the hole in the next two-year cycle has grown in recent weeks to as much as $24 billion to $25 billion. That's about 25 percent of current spending.

    The gap is now proportionately larger than the deficit California recently closed with cuts and fee increases, its fourth dose of budget misery since September 2008.
    --snip--

    http://www.dallasnews.com/sharedcont...s.274b11d.html

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    Default Re: Texas facing possible $25 billion budget gap

    Public workers are going to have to accept deflation in their salaries these days. The biggie bucks times are over for this country.

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    Default Re: Texas facing possible $25 billion budget gap

    Texas will do what is necessary. We haven't heard a peep about Texas seeking any kind of Federal help, have we ?

    On the other hand, California and other states are expected to go to Washington seeking a Federal bail-out for their budget deficits. With Republicans controlling the House, and since most of the states drowning in red ink are still "blue", it is expected that the answer will be "NO". Instead there is a proposal to create a type of bankruptcy for states where they can do the necessary and break the union contracts that are strangling their budgets. Long past time.

    Greenspan was right when he argued that he was not worried that the Chrysler bail-out of the late 70's would fail. He was worried that it would work. Likewise the Federal loan guarantees for N.Y.C. set a terrible precedent. The one difference was that Governor Carey forced the unions to buy N.Y.S. and N.Y.C. debt with their pension funds along with other belt tightening.

    Ironically it was two Republicans , Giuliani and Pataki who really broke fiscal discipline and tried to "buy" re-election as mayor and governor respectively. N.Y.C. and especially N.Y.S. are paying the price for their reckless spending now.

    For comic relief there are the radio commercials now playing for California bonds on N.Y.C. radio stations. Didn't they already default on a previous issue ? Isn't this the same state that handed out IOU's instead of paychecks ?

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    Default Re: Texas facing possible $25 billion budget gap

    Quote Originally Posted by Eric Stoner View Post
    With Republicans controlling the House, and since most of the states drowning in red ink are still "blue",
    Actually, that's not true- blue state deficits are larger on average, because their economies are larger on average. CA really screws the curve.

    But expressed as a % of State gdp, deficits run a lot higher in the subsidized states ( where fed money going in is a larger # that fed $ going out)- and they're southern, reddest of red states.

    The republicans will cave, unless they want to punish their own constituents more severely than the rest of the nation.

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    Default Re: Texas facing possible $25 billion budget gap

    ^^^ undoubtedly this is why Texas has a clone of the Arizona immigration law on deck. See . If you look at all of the state's big ticket spending items, medicaid, education, LE/prisons etc. constitute huge percentages of total state spending, and illegal immigrants arguably absorb a significant slice of that spending. Texas' politically incorrect back room accountants have undoubtedly figured out a way to cut spending in these areas rather quickly without affecting the CITIZENS of Texas ... and Texas and Arizona can also pull together share legal costs to survive the federal court challenges !!!

    As to the relative economic distress of Texas versus California, 'oh please'. Nobody bothered to account for some 'minor' differences i.e. the fact that California has 'off the books' borrowed $8.5 billion from federal taxpayers via California's unemployment insurance fund to partially offset 'on the books' budget shortfalls ( and continues to borrow an additional $40 million a DAY with which to pay for unemployment checks ). See

    Guaranteed that Texas will deal with their budget deficit problem on the 'spending' side long before they resort to the 'tax' side.


    For comic relief there are the radio commercials now playing for California bonds on N.Y.C. radio stations. Didn't they already default on a previous issue ? Isn't this the same state that handed out IOU's instead of paychecks ?
    by sheer coincidence, California's muni bond insurer AMBAC filed for bankrutpcy yesterday !!! So if California defaults again on uninsured bonds, the uber-rich California muni bond investors will have to eat the losses themselves ( or accept IOU's as interest payment ) !

    ~
    Last edited by Melonie; 11-09-2010 at 03:08 PM.

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    Default Re: Texas facing possible $25 billion budget gap

    also, California just released their own ( partial ... leaves out repayments on federal loans to the state's unemployment fund, leaves out repayments on local gov't 'loans' i.e. making up for underpayments of state funding to local gov'ts / school systems etc. ) 25.4 billion dollar budget deficit ...



    I won't quote the article because it's simply too long and too depressing. However, one aspect is fairly clear after last week's election results ... that the 'temporary' state income tax rate increase isn't likely to remain 'temporary'.

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    Default Re: Texas facing possible $25 billion budget gap

    Quote Originally Posted by Eric Stoner View Post
    Texas will do what is necessary. We haven't heard a peep about Texas seeking any kind of Federal help, have we ?

    From:
    http://money.cnn.com/2011/01/23/news...ulus/index.htm

    Perry also likes to trumpet that his state balanced its budget in 2009, while keeping billions in its rainy day fund.

    But he couldn't have done that without a lot of help from ... guess where? Washington.

    Turns out Texas was the state that depended the most on those very stimulus funds to plug nearly 97% of its shortfall for fiscal 2010, according to the National Conference of State Legislatures.
    Last edited by eagle2; 02-02-2011 at 12:01 AM.

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    Default Re: Texas facing possible $25 billion budget gap

    A major factor that has increased Texas' state budget deficit over projections can be summed up in three words - ' Federal Drilling Ban '.



    (snip)The study by Science Applications International Corp. at the request of the National Association of Regulatory Utility Commissioners, the Gas Technology Institute and others shows the U.S. economy will suffer $2.3 trillion in lost opportunity costs over the next two decades, monies that would go a long way to reining in runaway deficits and creating economic growth.

    Critics will say this is another self-serving study paid for by oil industry groups, but unlike the climate change fantasies concocted by the Intergovernmental Panel on Climate Change and Britain's Climatic Research Unit at the University of East Anglia, the study's data can survive fact-checking and the conclusions are rooted in reality.

    Drilling restrictions in Alaska's Arctic National Wildlife Refuge and in offshore areas such as the Chukchi Sea and Outer Continental Shelf, the report says, are denying us access to at least nine years' worth of total U.S. oil and gas consumption.

    The U.S. used 22.8 trillion feet of gas and 5.2 billion barrels of oil in 2009. Locked up by federal restrictions are approximately 43 billion barrels of oil and 286 trillion cubic feet of natural gas. Without access to these resources, average natural gas prices will rise 17% by 2030 and electricity prices will "necessarily skyrocket," as Barack Obama once said, by 5%.

    The net effect of our energy inaction will be a reduction in gross domestic product by $2.36 trillion cumulatively through 2029, or by 0.52% annually. We'd also be forgoing hundreds of thousands of high-paying energy and construction sector jobs here in the U.S."(snip)

    Obviously, the effects of the de-facto drilling ban are felt much more heavily in states like Texas and Louisiana, where the states not only lose 'royalty' income on extracted oil and gas, but also lose tax revenue contributions from (now) unemployed oil rig workers, oil service workers, supporting contractors etc. Additionally, every additional unemployed Texas oil rig worker means that the state must shell out additional dollars for state unemployment checks, for medicaid benefits etc.

    ~
    Last edited by Melonie; 02-02-2011 at 04:35 AM.

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    Default Re: Texas facing possible $25 billion budget gap

    Quote Originally Posted by eagle2 View Post
    From:
    http://money.cnn.com/2011/01/23/news...ulus/index.htm

    Perry also likes to trumpet that his state balanced its budget in 2009, while keeping billions in its rainy day fund.

    But he couldn't have done that without a lot of help from ... guess where? Washington.

    Turns out Texas was the state that depended the most on those very stimulus funds to plug nearly 97% of its shortfall for fiscal 2010, according to the National Conference of State Legislatures.
    A. I don't like Rick Perry for a LOT of reasons. His deliberate botch of an inquiry into the execution of the innocent in Texas being the least of it.

    B. What was it exactly that he did wrong ? As Governor he os obligated to protect the public fisc of Texas. If Texas was eligible for the money and he went and got it, so what ? Christie did the same thing in N.J.

    C. As Mel points out, Texas has taken a HUGE economic and revenue hit thanks to BOTH the BP disaster AND the resultant drilling moratorium.

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    Default Re: Texas facing possible $25 billion budget gap

    Quote Originally Posted by Melonie View Post
    A major factor that has increased Texas' state budget deficit over projections can be summed up in three words - ' Federal Drilling Ban '.
    How is it that liberal states like New York and Massachusetts have smaller projected budget deficits than Texas, yet they don't get any oil revenue?

    California has a significant amount of off-shore oil reserves. Why is it that in all this time we've discussed California's economic problems, you've been constantly blaming California's high tax rates for their problems, but as soon as Texas' economic problems are pointed out, the first thing you come up with as the cause is the 'Federal Drilling Ban'? Why is it that a federal drilling ban is the cause of economic problems for a low tax conservative state with off-shore oil reserves, but high taxes are the cause of economic problems for a high-tax liberal state with off-shore oil reserves?

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    Default Re: Texas facing possible $25 billion budget gap

    Quote Originally Posted by Eric Stoner View Post
    A. I don't like Rick Perry for a LOT of reasons. His deliberate botch of an inquiry into the execution of the innocent in Texas being the least of it.
    That's something else we agree on. I don't like Rick Perry either.

    Quote Originally Posted by Eric Stoner View Post
    B. What was it exactly that he did wrong ? As Governor he os obligated to protect the public fisc of Texas. If Texas was eligible for the money and he went and got it, so what ? Christie did the same thing in N.J.
    From what I remember, in past discussions you compared using federal stimulus money to help states with their deficit to giving drinks to alcoholics or giving money to drug addicts. Why is it different with Texas?

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    Default Re: Texas facing possible $25 billion budget gap

    How is it that liberal states like New York and Massachusetts have smaller projected budget deficits than Texas, yet they don't get any oil revenue?
    I'm glad this issue was raised ... the answer of course is that Texas does not have a state income tax, while these other states do. So even though these other states also lost private sector employment thus tax revenues stemming from that employment, the other states were able to make up for it by increasing the state income tax rate that must be paid by remaining businesses and workers in those states ( as well as increasing a host of other state taxes and fees ).

    As you sort of point out above, increasing state tax rates has the short term effect of mitigating state deficits in an environment where state spending levels are not being cut. However, in the longer term, increasing state tax rates provide an ever stronger incentive for state businesses and higher earning residents to relocate to a lower tax rate jurisdiction.

    Also, NY and MA are not located next to the Mexican border ... thus their state budgets are less affected re additional costs of providing social welfare benefits / law enforcement and correction / school system and medical treatment costs for large numbers of recent ( illegal ) immigrants who consume far more dollars worth of such benefits / gov't services than they contribute in state tax revenues. This isn't to say that NY and MA aren't receiving recent ( illegal ) immigrants ... only that as a proportion of state population there aren't as many.

    Unlike NY and MA, a fair portion of Texas state tax revenues stem from de-facto state excise tax on assets. Thus as relatively highly paid oil rig and oil service workers leave the state along with the former oil rigs they worked on ( taking their personal possessions with them ), the state tax revemues stemming from state excise taxes on their pickup trucks, big screen tv's, bass boats and other personal possessions fall to zero. And while recent ( illegal ) immigrants may indeed acquire pickup trucks, big screen tv's etc. upon settling in Texas, it is extremely unlikely that they are going to officially register to allow collection of state excise tax on these possessions !

    ~
    Last edited by Melonie; 02-04-2011 at 04:11 AM.

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    Default Re: Texas facing possible $25 billion budget gap

    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

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    Default Re: Texas facing possible $25 billion budget gap

    Quote Originally Posted by eagle2 View Post
    That's something else we agree on. I don't like Rick Perry either.



    From what I remember, in past discussions you compared using federal stimulus money to help states with their deficit to giving drinks to alcoholics or giving money to drug addicts. Why is it different with Texas?
    State deficits are STATE responsibilities. However, if the Federal government is "giving away" money, what Governor is going to turn it down unless there are oenrous conditions or strings attached ? The problem comes when a state does not treat things like Federal stimulus money as they ought to be i.e. found money and instead budgets as though such Federal largesse can be reasonably expected year to year.

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    Default Re: Texas facing possible $25 billion budget gap

    Looks like one attempt to close the gap went bad.

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