States Deficit Spending : Unions/Healthcare/Pensions

With most states running a deficit and into the future, one still has to wonder just what the leaders where thinking when they spent more each year than they took in in revenue. Why would anyone do that?

Unions did it so they could fund Democrat campaign candidates - taking retirement funds of the workers and large shares of dues to do it. Now they are all in trouble. And where are they all headed, of course, the average taxpayer that saved their money so they would have it when they retire.

But hey, why cry over this problem, what better way to spend our retirement money than to help out the unions and federal workers.


Where Did the States Go Wrong?
Source: David Wessel, "What Sent States' Fiscal Picture into a Tailspin?" Wall Street Journal, January 27, 2011.

There are several reasons for state governments' fiscal woes, says the Wall Street Journal.

The recession:
The deep and long recession devastated tax revenue --in early 2009, state and local tax revenue combined were down 11 percent from year-earlier levels. Despite an improving U.S. economy, tax receipts at the state level remain 12 percent below prerecession peaks.

The boom:
In the good times, governments enjoyed and spent a tax windfall; state and local tax revenue rose 36 percent in the five years before the bust. Going into the recession, spending exceeded the revenue that states and localities can expect to collect in normal times.

Health care:
In 1978, health spending accounted for 12 percent of state and local spending.
Twenty years later it was 20 percent of much-larger budgets. Medicaid accounts for more than $1 in every $5 of state spending, more than states spend on elementary and secondary education.

Pensions:
States and localities began funding their pensions more soundly, but then a long bull market led management and unions to count on super-charged stock market returns to cover the future costs. Stock market busts of the early and late 2000s show the downsides of that strategy.