Budget Forecast Gets Worse

Slightly old news, but the budget situation is getting worse as the legislature prepares for a special session next week.

A chief reason for the gloomy outlook is the sharp downturn on Wall Street that began in September with the federal bailouts of Fannie Mae and Freddie Mac and the bankruptcy of the Lehman Brothers investment bank. Those collapses, along with the sale of Merrill Lynch and the bailout of insurance giant AIG, set off a cascade of collapsing stocks. Those events will result in diminished capital gains for investors and reduced taxes on those gains collected by the state.

Capital gains could drop by 40 percent, translating into hundreds of millions of dollars in deficits in the future. (Keating)

The thing is, it could be a long time before those numbers come back to the level they were at in 2007 and 2006.

Also, as the Journal Inquirer notes, even if the legislature enacts all the proposed spending cuts, the state will still be in the red at the end of the year. More is going to be required. The budget deficit is growing faster than it can be cut right now, which is a very bad sign.

Source
Keating, Christopher. “New Gloomy Forecast On State Deficits.” Hartford Courant 19 November, 2008.

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16 responses to “Budget Forecast Gets Worse

  1. [quote]The thing is, it could be a long time before those numbers come back to the level they were at in 2007 and 2006.

    Also, as the Journal Inquirer notes, even if the legislature enacts all the proposed spending cuts, the state will still be in the red at the end of the year. More is going to be required. The budget deficit is growing faster than it can be cut right now, which is a very bad sign.[/quote]

    Maybe now people will finally understand just how much money the State makes off a very small number of people, and how much the State’s budget depends on having a few wealthy people live here.

    Also, the problem isn’t the growing budget deficit this year, it is the growth in the budget as a whole over the last fifteen years. Today’s problems were easily foreseeable, because our State has been spending money like drunken sailors on leave since the income tax was implemented, and now we’re all worse for it. Congratulations, Democrats. You now have exactly what you asked for.

  2. [quote comment=”38619″][quote]Congratulations, Democrats. You now have exactly what you asked for.[/quote]

    Jack, what does it matter anymore? They got us into this mess and spent us right into the red, yet they have a 112-39 majority in the House. Its what the voters want: higher spending, higher taxes, big government, no accountability, and BS. They voted for it and continue to vote for it. Yet they are too stupid to realize that it is their own fault when they try to be trendy and vote Democrat, but shoot themselves in the foot and then complain about it.

    State Dems have pulled the wool over everyone’s eyes and they will blame Rell for the deficit yet somehow they will escape blame.

  3. elwonk said:
    >>State Dems have pulled the wool over everyone’s eyes and they will blame Rell for the deficit yet somehow they will escape blame

    Judging from national polls that show that less than half of Obama’s supporters are under the impression that the Republicans control both chambers, they’ll surely think the same thing here solely because Rell has an “R” after her name.

    Just 2% of voters who supported Barack Obama on Election Day obtained perfect or near-perfect scores on a post election test which ….

  4. Post # 3 is poorly phrased – and it’s only the grace of God that my links worked.

    CG – Ya gotta bring back the “preview” function

    Everything remains centered by the way.

  5. Can we turn off centering?

  6. On this page, there’s an open center tag three times, but a close center tag only once. It’s really weird to have everything centered? Even though I lean to the right, when it comes to type-setting, I’m a leftist!

  7. Years of no fiscsal discipline, high levels of borrowing, granting rich employee benefits without paying for them are coming home to roost. The OPM presentation the other day noted that Connecticut ranks 49th of the 50 states in per capita Long Term Obligations (debt and unfunded employee obligations). In a deleveraging environment here is very little room to maneuver when you’re leveraged to the hilt. As Jack Dobb notes above, the chinks in the State’s revenue schemes are showing. The situation is a no unlike the Detroit three, and will require complete restucturing of labor costs, debt levels, etc before the State will get out of this.

  8. I think we need to ask ourselves why our state budget per capita is so much higher than just about every other state. What are we spending that money on, why can other states do it more cheaply?

    NY Gov. Patterson (Dem) seems to be dead-set against any tax increase in NY. The Republicans in the state senate seem to favor tax increases, as they are totally beholden to certain unions. Yeah, you read that right.

    There’s going to be very limited capital gains to tax in the next few years. The state relied on the rich paying a lot. Now the rich aren’t as rich (or at least, they’re not generating much in new revenue that the state can tax), and the state is scrambling to find other solutions.

  9. Has anyone tried a post with a slew of closed /center?
    If it stops, this worked – otherwise ……….well it didn’t.

  10. The center tags are in not in square brackets. But the editor program removes those tags from posts, so you can’t turn the centering off…

  11. Well, I mean to say greater than and less than signs, but I typed the signs. They too are removed by this program… So we are stuck in the center.

  12. Any word on how this is going to affect advocacy groups during the session? If they don’t raise taxes, what’s getting cut; what’s not getting passed?

  13. I’m no economic expert, but there seem to be some mixed signals here. Clearly, the prevailing mood is one of crisis and depression and “Oh my God, it’s really bad and it will get worse and it will never get better and we’re all royally f–ked.”

    Then I read something like this in the Courant, from Nicholas S. Perna, Ph.D., economic adviser to Webster Financial Corp. and a member of Gov. M. Jodi Rell’s economic advisory board:

    “Rather than replicate the 1930s, the current recession is likely to resemble the downturns of 1974-75 and 1981-82. Hence, it should last until the middle of 2009 — depending on the nature of the next stimulus package. The unemployment rate, which bottomed at around 4.5 percent in 2007, could reach 8.5 percent in 2009, which is 2 points above this past October’s level. The most recent survey of national forecasters (including me) by The Wall Street Journal sees a milder recession where unemployment tops out at 7.7 percent in 2009.”

    Now THAT sounds very different – and very survivable. And NOT an excuse to cut every program imaginable, fire all the workers, and bolt the doors.

    What gives??

  14. People are panicking.

    That’s why recessions / depressions used to be called panics.

    We’ve have all seen this before in our lifetimes — 1992 comes to mind, but that could just be because that’s when I came out of college.

    The credit freeze up is a more unusual problem. Guess we should’ve insured those mortgage backed securities after all, because now it seems like we’re still just stumbling around. It too will resolve.

    Oh, and the Democrats, UAW, and GM Shareholders are desperate to avoid bankruptcy. Call me cynical, but when UAW is due tens of billions of dollars from GM to establish the Retiree Health Care Trust and take over that part of the pension program, last thing they want is a bankruptcy judge saying no.

    With RHCT, the UAW has a wonderful source of “management fees” to offset ever declining union dues. With a UAW with steady revenues the Democrats have a steady source of political donations…

  15. Hey, we’re no longer a centrist blog!

    (badda bing!)

  16. “I’m no economic expert, but there seem to be some mixed signals here.”

    Mixed signals??? Both sides agree we are looking at a state deficit over the next two years of over $6 billion dollars….. And what they call a “deficit” never fully paid all our bills in the first place.

    The only possible missed signals could be coming from those from both parties who are either too naive to understand simple math, or too bought and paid for by their special interest masters too even care.

    This state has only been able to go on with it’s wasteful, totally out of control spending, because it could count on extorting from the golden goose (Fairfield county) what it needed from a very small percentage of the population. Guess what? The golden goose is now very sick.

    I knew when I ran my business that having a disproportionate amount of my income coming from a very small percentage of my customers was very risky business. Too bad we elect so many lawyers, instead of business people (GM excepted) to Congress and our General Assembly.

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