Sunday, July 31, 2011

Why any debt-ceiling deal will squeeze the states

Among the biggest items on the chopping block in Congress are education and Medicaid spending — federal dollars that make up the largest parts of most states’ budgets. Nearly every state government has already set its budget for the next year — some for the next two years — under the assumption that federal spending would remain more or less consistent. If such money is abruptly pulled, states won’t suddenly be able to change their spending obligations or raise taxes.

“They’re going to have to eat that in some way, and many will pass [the cuts] onto local governments,” said Frank Shaforth, director of the Center for State and Local Government Leadership at George Mason University.

Amid the recession and dropping revenues, there’s already been an uptick of bankruptcy filings by cities, towns and rural districts across the country over the past two months and there could be more if Washington follows through on its promise to slash spending as soon as possible.
This gloomy prediction explains that no matter how the federal fiscal crisis is resolved, Washington's penury will be passed on to states who in turn will shift more services to local governments. Who in turn will shift more services to...let me guess...HOAs? What's that saying about excrement flowing downhill?

No comments: