• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Outside the Beltway: California’s Nightmare the Future for Other States?

    The budget shortfalls, plunging revenue, and economic woes plaguing near-broke California could foretell the future of other cash-strapped states.

    A new study by The Pew Center on the States found that the economic pressures that pushed California to the brink of a total economic meltdown are also found in nine other states across the country, all of which could face a financial disaster just like the one in the Golden State.

    Those states with economic conditions most like California’s include Oregon, Nevada, Arizona, Wisconsin, Illinois, Michigan, Florida, New Jersey and Rhode Island. What do they all have in common? Major drops in revenue, growing budget gaps, increasing unemployment, high foreclosure rates, a supermajority requirement for state legislatures to pass budget bills (which includes making budget cuts or raising taxes), and similar troubles managing long-term fiscal matters and budgetary processes.

    Spiraling toward a California-style economic crisis isn’t a destiny these states want. According to The Pew Center on the States:

    These states’ budget troubles can have dramatic consequences for their residents: higher taxes, layoffs or furloughs of state workers, longer waits for public services, more crowded classrooms, higher college tuition and less support for the poor or unemployed.

    While these economic conditions aren’t good for the states, they’re not good for the country, either. According to The Pew Center:

    The 10 states account for more than a third of America’s population and economic output. And actions taken by state governments to balance their budgets—such as tax increases and drastic spending cuts—can slow down the nation’s economic recovery.

    Unemployment and high foreclosure aside, The Pew Center points to poor governance and unrestrained spending as a root of California’s troubles – and that is a teachable moment for other states, not to mention Congress.

    California lawmakers since the late 1990s have increased spending by more than the rise in state population or inflation. In the meantime, policy makers rarely set aside in the rainy day fund the 5 percent of general funds permitted by law, giving the state less of a cushion during lean times.

    California ran into trouble when it faced a budget shortfall, legislators couldn’t agree on tax hikes or budget cuts, and voters refused to raise taxes, too. There’s a commonsense solution for that problem: don’t spend more money than you have and save money for a rainy day. Like California, the other states in peril just don’t seem to grasp that simple axiom, and they ignored their economic realities while basing their spending decisions on the flawed assumption that revenue would continue to grow.

    If there is one takeaway from the study, it’s this: leaders in state government need to muster the economic willpower to make the tough decisions to put their budgets back on the right track. That means cutting spending and making government smaller.

    And the message to Congress, as it contemplates trillions of dollars in new spending? There is not an unlimited supply of revenue, and bad spending decisions can lead to economic disaster.

    Posted in Ongoing Priorities [slideshow_deploy]

    25 Responses to Outside the Beltway: California’s Nightmare the Future for Other States?

    1. Hildy, Pennsylvania says:

      Curious as to where Pennsylvania ranks in this. Finally voted on some sort of budget but was wondering if they were not too far behind from those mentioned.

    2. Ben, Rising Fawn, GA says:

      What do they all have in common? All, with the exception of Florida I believe, have been run by Democrats for decades. Democrats have done to these states what Obama is trying to do to the whole country.

    3. Scott, Arizona says:

      Sad thing is, when AZ finally got rid of Janet Napolitano, we got a "Republican" who has acted more like a Democrat than the former Democrat in that position.

    4. Gary Gonsalves, Carl says:

      The "Stop Taxing Us" group is working to get California back on a productive course. Search for them on facebook or visit their website at StopTaxingUs. com

    5. Dexter, San Francisc says:

      One thing that will certainly make government (state and nation, since none allows federalism) smaller and limit mismanagement is the impoverishment pecipitated by the current wreckless disregard that dominates the political class.

      They want class warfare? let them feed themselves.

      They will choke and die w/o having to fire a shot.

      The silent revolution that Alinsky could not see; their suicide is most welcomed.

    6. Charles, The Republi says:

      "None are so blind as those who will not see." It's amazing that a perfect example of where obamanomics will lead this country is right before our eyes and half the country & all the Rino's won't see it. After over 230 years of experience, we know what economic formulas work & what doesn't. But we don't teach civics & economics in our schools. Instead our children are being brainwashed with "climate change" & this "global citizen" nonsense.

    7. ACE SEZ says:

      Calif. is doomed–the PC libs outnumber the common sense voters and keep re-electin' the same idiots that are shafting the State, day after day–year after year

      With amnesty on the horizon I don't see any positive change for the future—Arnold doublecrossed his original constituency over and over–probably be hard for another 'movie celebrity' to get elected to much of anything.

    8. Bob, Portland, OR says:

      Oregon will be next.

      Our state is and always has been run by the left.

      We have a 10% income tax and they are proposing an increase.

      We have a state retirement plan, PERS, that continues to fleece tax payers.

      Businesses continue to leave and now the people are.

      The insanity is this, the more they tax us the less revenue they actually get.

      Fools all of them.

    9. Dieter621, NJ says:

      High unemployment surely can't be caused by illegal alien working under the table and sending their money home while US citizens foot their medical and social bills, and H1B VISA holders taking jobs from college graduates. I'll bet the political answer is another conference to identify problems as long as the solutions are politically correct. What the spineless politications need to do is identify the illegals, cancel H1B Visas, and immediately start exporting these individuals out of the country. Just the jobs created in this effort would enhance economic conditions.

    10. Linda Carlsbad, CA says:

      I live in California. We have a governor that has allowed the Federal government to cut our water off to our farmers. They have just raised our payroll taxes by 10%, when we the people voted no more taxes. We have liberals in our legislature doing nothing to help California, only their lobbists!

      This is a shame, people in California need to vote all these corrupt people out, and take back our state.

    11. Steve, Land of Linco says:

      Illinois' illustrious governor has decided to issue bonds that will alleviate the need for the Chicago Transit Authority to raise fares for two years. Illinois currently has a state budget shortfall of $9 billion and yet our governor is borrowing money that all citizens of Illinois will be responsible to repay even though 3/4 of the population will never enjoy the fare freeze on the CTA because we don't use it. We don't use it but we'll be paying for it. Amazing governance.

    12. Bill, Forney, TX says:

      … if you are a fiscal conservative, get to Texas as fast as you can. Texas continues to have a budget surplus, even now yet has no state income tax. both PA and TA (that stands for Taxachusettes) are both headed in the same direction as CA …

    13. Tim Az says:

      Amen Scott. The only thing we can be happy about is that we can't rack up the debt that California has because Arizona doesn't have any credit left to borrow on. So we will remain in the single digit billions until these silly liberals are put to rest. We can recover quickly with the right people in the House and a governor to match. We can't afford another Napolitano or her entitlement cronies. If we can be responsible with our own money. The govt. must be made to appreciate our money and spend it sparingly.

    14. Jill, California says:

      Unfortunately, California has a governor who condones and encourages fraud and corruption.

      When I was injured in the line of duty as a volunteer firefighter, the County repeatedly engaged in illegal conduct to deny the medical care I was entitled to. But I wouldn't back down. I kept fighting it. So what should have been a minor injury cost the taxpayers more than $30,000 in medical expenses (so far). I have no idea what the legal expenses were.

      I repeatedly complained to the governor's office. He and his staff refused to stop the illegal conduct.

      If I had made fraudulent statements for the purpose of obtaining Workers' Comp coverage, I'd have been charged with a felony, hit with a hefty fine, and perhaps been thrown in jail. But when the County committed a felony for the purpose of denying care, there were no consequences.

      This, my fellow taxpayers, is part of why California is experiencing a dire financial crisis. Our tax money goes to fund, not fight, fraud and corruption within government.

    15. Pingback: Obama’s Enviro-War on the Free World; a boon to Communist China, Japan is not buying it « VotingFemale Speaks!

    16. Stirling, Huntingdon says:

      I'm sure Pennsylvania is up on the list. From my understanding the entire northeast probably is, as it's run mostly by democrats in the governments. My elected officials when I contact them, their response is always "the people want the programs, so I have to vote for them, etc." Nobody seems to be getting the clue that you can't keep spending what you don't have in the first place. It's like taking to a brick wall.

    17. Amy, Arizona says:

      You can thank our EX-Governor Janet Nopalitano for bankrupting the State of Arizona with all her social spending and "soft" on border enforcement programs that plundered the state treasury before she left… I can only say THANK HEAVEN she is GONE! It really isn't that easy to UNDO all this mess to make us solvent again…

    18. Brad S,, Detroit, MI says:

      Believe it or not, our State House has a Republican majority and they keep sending our Canadian-born Democratic liberal whacko Governer a balanced budget with cuts in government spending and she continues to stall and try to come up with new ways to tax people so no cuts need to be made . . . How ridiculous ? You are right, the history is out there on when you give people and business tax cuts, their revenue goes up ! The movie industry has flocked to Michigan in the past year because of the tax incentives that were offered. It already worked for one industry, and yet they want to tax services (all – from haircuts to lawn maintenance) to avoid making cuts. This is the definition of insanity. Continue to raise taxes and get less revenue year after year. People are fleeing Michigan as if it were radioactive.

    19. Roger S., Ma. says:

      There's an old bit of wisdom circulating among aviators:

      "Lousy (read: unstable) approaches cause lousy landings."

      Whether you "squeak by" or end up in a heap then depends on

      circumstances beyond your control. You just became a passenger.

      What's so different about an economy, home, local, state, or federal? Assuming that most of these ladies and gents are, or once were lawyers, one must ask what there is in the typical legal education that destroys common sense? Do they run their private lives the same way? Or did we pay them too well? Or are they "robbing" someone else on the side? Or is our system so corrupting they can't help it? In other words, do they reflect our society or their own?

    20. Russ Kinz Fairfiel says:

      I think it is great that California has to have a 'supermajority' to pass budgets, raise taxes and the rest. If we did not have this, the leftist tax and spend jokers would really have a field day taxing and spending.

    21. Mike Winsauer, Kings says:

      What's so amazing about Texas and its solid economy, is that all the leftists publish hit pieces on Gov Perry and characterize him as a "fringe nutcase" much as they did with Gov Palin.

      These democratic socialists can see what really works and still they keep taxing and spending. And their gullible constituents keeping on listening to the B.S. and running like lemmings to the cliff willing to sell their kid's future for a "few pieces of silver".

      Who is more to blame….the corrupt politicians or the apathetic and greedy citizenry that choses to let them do it?

    22. Freedom of Speech, T says:

      California is living proof and precedent that a super majority does not even matter when the electorate puts a super majority of liberals in Sacramento.

      The citizens of California have been duped and yet the liberals keep the majority.

      This is obvious what the majority of Californians want and/or too many have given up and have voter apathy.

      My concern is that the the United States does not let California Progressive movement dominate and ultimately destroy this country.

    23. Pingback: Study of Spending in Illinois Shows $350 Million in Waste | The Foundry: Conservative Policy News.

    24. Pingback: Study of Spending in Illinois Shows $350 Million in Waste | The … | Too Much News

    25. Pingback: Outside the Beltway: Luaus in Illinois? Sure, When Pork Is What’s for Dinner! | Step Down Obama

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×