The federal debt ceiling has not ended America’s financial woes, but budget cutbacks will soon be coming to a state near you. As Nicholas Johnson at the Center on Budget and Policy Priorities told the Washington Post:
‘The debt-limit deal inevitably will lead to large federal cuts in programs for state and local governments…This is going to begin in the middle of the worst year for state budgets.’
States had to close more than $100 billion in budget gaps [this year], mostly through spending reductions that often affected programs previously considered sacrosanct. That came on top of about $400 billion in budget shortfalls in the previous three fiscal years, caused by diminished revenue coupled with a surge in the demand for social service programs during the recession…34 states have cut K-12 education funding, 43 have reduced college funding, and 31 have slashed money for health care.
As revenues fall, fixed costs remain stunningly high. According this story in the WSJ. Detroit’s pension costs equal one fourth of its $1.2 billion general fund. The deep blue Democratic government of Detroit has negotiated tough pension cuts and will be coming back to local employees for more. Mayor Dave Bing: “Detroit could no longer afford its pension system as it was structured.”Neither can hundreds of cities and dozens of states. More changes, more crises are coming as the big blue model moves ever deeper into decline.