We’ve written extensively about the dire straits in which the state of California finds itself (click here).  But the Golden State is certainly not alone.  The states that saw the greatest excesses during the housing bubble are the same ones feeling the most pain today.  Consider Arizona:  The New York Times reports that “In Need of Cash, Arizona Puts Offices on Sale.”

The office building houses most of the State of Arizona’s government and was recently put on the market to help this broke state close its budget deficit.

It is looking like a pretty good deal, if the state can prove it is credit worthy…

To help close a $3.2 billion revenue shortfall, lawmakers allowed the sale and lease-back of the executive office tower, the buildings that house offices for both chambers of the State Legislature, as well as 10 prison complexes, a state mental hospital and other buildings. (For now, the historic Capitol, with its grand dome and aging interior, is not for sale, though state officials continue to ponder the possibility.)

Yes, the State of Arizona is actually considering selling its Capitol building!   What’s next, corporate naming rights?  How does the “Coca-Cola Capitol Building” sound?  Or the “Starbucks Statehouse”?  The possibilities are endless.

At any rate, the handwriting is on the wall here:  States can only close their budget gaps so many ways, and all involve some combination of higher taxes and lower levels of services for those dollars. This problem isn’t going away.

Charles Sizemore, CFA
Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy

Prohibition was repealed long ago, of course.   President Franklin Delano Roosevelt found it convenient to reintroduce booze into American popular culture for two reasons.  First, it won him votes.  Secondly, it brought in a windfall of tax revenues at a time when they were sorely needed.

With all levels of government — federal, state, and local — facing varying levels of fiscal crisis, and with faith in our elected representatives at a level so low as to border on outright contempt, might this move from FDR’s playbook be worth a look? Read the rest of this entry »

In prior posts, we’ve discussed the Federal bailout of the states.   Many states, most notably California, intend to use Federal money on a host of pork projects, which is mind boggling considering the budget deficits and fiscal problems that these states are facing.  

The Wall Street Journal reports that California is having to close state parks and school classrooms and may cease monintoring sex offenders due to lack of funds…yet that hasn’t stopped them from requesting Federal funds for a $9 million bike path in Marin County!   Read the rest of this entry »

A lot of questions are being asked about the stimulus bill working its way through Congress.  Most economists agree that some level of government involvement is needed, even it is is something seemingly small like a relaxing of the mark-to-market accounting rules that have contributed to the woes in the financial sector.  

A period of weak consumer and business demand can be partially (though nowhere near fully) mitigated by government infrastructure spending.  Though governments rarely if ever allocate capital as efficiently as the private sector, there is usually some residual benefit.  For example, Roosevelt’s make-work projects during the Depression helped electrify much of rural America.

Surely there are plenty of road, rail, and air facilities that could stand to be built or improved.  With billions of federal dollars going to the states, many of these  projects will finally get the funds needed to break ground.  Unfortunately, so will plenty of unworthy projects selected to appease political constituents.  California has a particularly long “wish list.” 

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It’s during hard times like these that charity is most needed.  After all, who needs charity when the economy is booming and jobs are plentiful.  Unfortunately, the charities themselves are in need of a little charity. Most of these organizations receive funding from state governments.  Of course, the states themselves are having a hard time paying the bills.

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