CHESSNOID

The value of homes have dropped and will continue dropping. This means there will be less property tax revenue collected and those income streams will continue to decline. People spending less also means there will be less sales tax revenues collected and that future revenues will continue to decline before it flattens out. Bottom line, many states running budget deficits will not be able to kick the can down the road with accounting techniques.

The budgets have to be balanced and that will require the state government increasing revenues (which doesn’t seem likely in the near future) or cut spending. More than likely, the federal government will have to bail out the states because they don’t want the unemployment rate to continue going up which will happen if they are forced to cut programs.  Even increase job losses mean less taxes to be generated for both the federal and state governments.

NEW YORK (Fortune) –

California is hurtling into the budgetary abyss — and it’s not alone.

Across the nation, state tax collections in the first three quarters of 2009 posted their steepest decline in at least 46 years, according to a report this month from the public policy research arm of the State University of New York.

At least 30 states raised taxes in their most recently completed fiscal year — which ended in most cases in mid-2009. Even more cut services. All told, states raised $117 billion to fill last year’s budget gaps, the Pew Center on the States estimates.

Yet despite all those new taxes and deep cutbacks, pressure on state finances continues to build. Economists warn that without a new round of federal stimulus spending, states could face another round of layoffs that could kneecap an already shaky economic recovery.

“We could see a real ripple effect if the states don’t take a balanced approach” by balancing cutbacks with tax raises and other new revenue, said Jon Shure, deputy director of the state fiscal project at the Center on Budget and Policy Priorities in Washington.

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And California’s not the only state facing an almost unfathomable shortfall. Like California, Arizona and Illinois face budget gaps above 40% of projected general fund spending, according to Pew data.

Arizona put its state office buildings on sale this week in a bid to raise $700 million. The University of Illinois furloughed some workers this week after the state failed to come up with $436 million in expected funds. Budget officers in those two states describe their outlooks for fiscal 2010 as “dire,” according to a National Conference of State Legislatures report.

Alaska, Nevada, New Jersey and New York face gaps of at least 30% of their planned general fund spending by the end of this fiscal year. A dozen more states face a fiscal 2010 budget gap of between 20% and 29%.

We have wasted taxpayer money on the previous government programs so far under both President Bush and Obama: corrupt bailouts, stimulus packages, cash for clunkers, and now the new health bill on the horizon. What will the Obama administration do before this crisis become big headlines like the 10% unemployment rate? These state budget deficits will bring the nation down if not dealt with urgency.