New Report Notes Fiscal Challenges Many States Face

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Report says states must make structural changes – more flexibility from Feds is needed for states’ stability

 AUGUSTA – A new task force led by former New York Lieutenant Gov. Richard Ravitch and former Federal Reserve Chairman Paul Volcker warns of calamity for states if they continue on their financial trajectory and highlights six threats to their stability. Today, Governor Paul LePage noted the report is a “call to action” for Maine, as well as other states.

The study, released Tuesday titled “Report of the State Budget Crisis Task Force,” outlines six major fiscal threats:Medicaid spending growth; federal deficit reduction; underfunded retirement promises; narrow, eroding tax bases and volatile tax revenues; local government fiscal stress; and state budget laws and practices which hinder fiscal stability and mask imbalance.

“Structural imbalances to the state budget exacerbate Maine’s financial situation,” says Governor LePage. “We need long-term, gimmick-free solutions to balance Maine’s budget and bring our fiscal house in order. This study also shows that the federal government needs to allow us the flexibility to be more fiscally responsible. Maine is not alone in facing these financial challenges, and we all must be prudent moving forward.”

While Maine has begun to tackle some of these issues by reigning in welfare spending and reducing pension debt, Governor LePage believes it is critical to pay attention to the financial cliff states are facing. “We are entering into a very uncertain time and with uncertainty our economy becomes vulnerable,” says Governor LePage. “Reductions in the federal budget have direct impact on states, but local communities are impacted too. There’s a ripple effect that we should all be aware of,” the Governor added.

According to the Maine Revenue Service 135,000 Maine business owners would see a total of $362 million in tax hikes if the Bush tax cuts expire. The expiration of the Bush era tax cuts that will cease on December 31, 2012 coupled with the automatic spending cuts that hit January 1, 2013. “If politicians are concerned with our economy than they have a funny way of showing it. Job creators are suffering because of an ideological battle in Washington,” Governor LePage noted.

The ongoing debate about the Nation’s debt is also hindering economic growth. Monday, the Government Accountability Office reported that the federal government spent an extra $1.3 billion to borrow last year because of the battle over the debt ceiling which is currently set at $16.4 trillion. Experts estimate that the debt load may approach the ceiling as early as mid-November. Governor LePage says it begs the question, “How much debt can the U.S.A. sustain?”

This report recommends that “prompt attention is needed to the effects that federal deficit reduction and major changes in the federal tax system will have on states.” Furthermore, the growing gap between states’ spending obligations and their available financial resources points toward a need to reexamine the relationship between the federal government and the states, according to the study. Chairmen, Ravitch and Volcker say, “The conclusion of the Task Force is unambiguous. The existing trajectory of state spending, taxation, and administrative practices cannot be sustained. The basic problem is not cyclical. It is structural. The time to act is now.”

About the State Budget Crisis Task Force: Initiated in June 2011 by Advisory Board Co-Chairs Richard Ravitch and Paul Volcker, the Task Force is focused on the enormous fiscal challenges confronting state and local governments.   With extensive practical experience in state and local fiscal matters, they are examining specific threats to near and long term fiscal sustainability in six U.S. states: California, Illinois, New Jersey, New York, Texas, and Virginia. The Task Force has partnered with leading independent experts in each state, who have produced extensive reports on potential threats to fiscal sustainability in their state.

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1 COMMENT

  1. I applaud Le Page for his steady position on budget matters. His story has always been the same going back BEFORE he was even Mayor LePage. However…..the lust to keep spending in quarters where he has no influence is breaking the bank.

    If you had attended the RSU 18 budget meeting in Oakland last night you’d has seen the little people against raising taxes get the snot kicked out of them. There were 14 warrants. The first vote was 231 to 117 against us.” After all the teachers and administrators took only a small 6 % raise so lets spend more on other things with the money we’ve saved you”

    My person taxes this year to the school only was $290. ONE YEAR JUMP. $ 290. But to be fair it jumped only $89 last year but of course the year before that it was up $ 356 .

    These spenders know we are not living in ordinary times but it is” to hell with you tax payers …we are taking what we want.”

    Alas, I guess it must be OK because the tax payers that did NOT show up to curb spending must approve of the boards’ irresponsiblity.  spenders win again.

  2. Hi!

    One of the things that Maine needs is to attract big time corporations to come to Maine and do business which will provide jobs (good paying jobs) and a tax base.

  3. Gov. LePage has been right all along.  He started his call to action the moment he got into office. He knows we cannot continue out of control spending. Unlike, the Feds, spending is not a problem with the Democrat especially.  Hmm, do they want this country going under????

  4. One thing that could help is for the fed to stop beating the hell out of small business. Who the hell dares to start a business with that SOB in the white House?

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