Government spending continues to shore up economy
The following excerpts are from the 2010 Mid-Year Keating Report, which includes analysis of federal, state, and local government spending, as well as an in-depth look at public works and government construction spending.
The U.S. economy is showing increased strength heading into the second half of 2010. A few signs of the recovery include:
- Local and state governments nationwide took in more money than they spent in the first three months of 2010 — their first surplus since 2007.
- State tax collections surpassed estimates in several states this spring following two years of declining revenues, which signals that state governments are slowly bouncing back.
After months of declines, state tax collections are starting to trend upward. Even so, Sujit CanagaRetna, senior fiscal analyst for the Council of State Governments (CSG) in Lexington, Ky., sees a challenging fiscal future for states.
"For the upcoming two years [fiscal years 2011 and 2012], it is estimated that states will face shortfalls of about $260 billion even after taking into account aid from the federal government," CanagaRetna tells Govpro.com. "Given the balanced budget requirements enshrined in almost every state constitution, state policymakers will continue to slash spending, expand gaming, tap rainy day funds, and raise taxes and fees to bridge the shortfalls."
Yes, city and county budgets are stressed out. The municipal sector likely will face a fiscal shortfall of between $56 billion and $83 billion from 2010-2012, driven by declining tax revenues, ongoing service demands and cuts in state revenues, according to the National League of Cities' recent "City Budget Shortfalls and Responses: Projections for 2010-2012" report.
Although the $75 billion Local Jobs for America Act (LJAA) could bring some fiscal relief to cities and enable local governments to hold off planned job cuts, governments may need to look beyond federal aid to help them balance their budgets, says Tad DeHaven, a budget analyst at the Cato Institute, a Washington-based libertarian think tank.
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