States work to stave off government shutdowns

Legislators in more than a half-dozen states, their revenues evaporating in the recession, frantically worked to stave off government shutdowns and devastating service cuts.
JUL 01, 2009
By  Bloomberg
Legislators in more than a half-dozen states, their revenues evaporating in the recession, frantically worked to stave off government shutdowns and devastating service cuts. California failed to meet a midnight deadline and now may need to issue IOUs instead of paying bills. Across the country, lawmakers are feeling the heat as their legislatures began the new fiscal year without a budget in place. In Illinois, the sputtering drive to come up with a state budget broke down completely Tuesday, leaving the state without any plan for paying its employees or delivering government services. The session ended without any firm plans to return or even for Gov. Pat Quinn and legislative leaders to resume negotiations. In Pennsylvania, Gov. Ed Rendell said Tuesday night he didn't think an agreement with lawmakers would come soon. The state faces the prospect of not being able to pay state employees if they cannot resolve an impasse. The end of June marked the end of the fiscal year in many states, meaning lawmakers worked late Tuesday to pass budgets in a year that has seen the recession take a devastating toll on government finances. Fallout from California's budget mess threatened to spread nationwide because of the sheer size of the state's economy. The Senate rejected three bills designed to save $5 billion, including $3.3 billion in education funding cuts that had to be enacted before Wednesday. Senate President Pro Tem Darrell Steinberg, a Democrat, called Republicans' refusal to vote for the measures "an irresponsible position to take." At least two Republican votes were needed to put together the two-thirds majorities required to approve the legislation, which passed the Assembly last week with bipartisan support. Arizona, Indiana, Ohio, Connecticut and Mississippi also were among the other states that raced against the clock to pass budgets — and avoid crippling consequences. Faced with a budget stalemate, the Ohio House voted in favor of a seven-day spending plan that will allow the state to keep operating while budget talks continue, the first temporary budget Ohio has been forced to approve in 18 years. Indiana narrowly averted a large-scale government shutdown after coming to terms on a budget. In Connecticut, Gov. M. Jodi Rell signed an executive order to keep the government running without a two-year budget in place. While she contends the average taxpayer won't notice any change, municipal officials fear delays in state grants that fund everything from road repairs to education. In Arizona, House lawmakers approved nine bills late Tuesday to implement most of a compromise budget negotiated with Gov. Jan Brewer. But they omitted two controversial tax proposals, including a sales tax increase that Brewer has insisted on. The Senate followed by giving the same Republican-drafted bills preliminary approval. In Pennsylvania, state workers will receive only partial pay on July 17 and July 24, after which paychecks will be withheld entirely until the impasse is solved. They will then be paid retroactively. Gov. Ed Rendell said 10 banks and credit unions have agreed to help 69,000 state employees by offering them low- or no-interest loans and lines of credit. In most states, the debate centers around whether states should be raising taxes to bridge the budget gaps. California Gov. Arnold Schwarzenegger said he wouldn't sign anything that raised taxes or fees beyond what he has already proposed. "They should forget about that," the Republican governor said, accusing Democrats of going through a "song and dance. Let's get to work, fix it." State Controller John Chiang has said he would have to start issuing the IOUs on Thursday unless lawmakers took steps to stem the state's red ink by then. Roughly $3 billion worth of IOUs will be issued in July unless a compromise on closing the deficit is reached quickly. They will be sent to state contractors, college students, welfare recipients, low-income seniors, the disabled and others who depend on or deliver state services. Counties will not get paid for social programs they administer.

Latest News

Finra's Reg BI Enforcement: Is it 'ineffective, costly'?
Finra's Reg BI Enforcement: Is it 'ineffective, costly'?

The industry watchdog's own reports reflect failures to deter "willful" and "repeat" violations, raising a crucial question about the future of regulation.

SEC prepares to back away from defending climate rule in court
SEC prepares to back away from defending climate rule in court

Acting Chairman Mark Uyeda directed SEC staff to initiate a pause in court while the commission awaits a quorum. The SEC may decide to withdraw from defending itself in a lawsuit over last year's climate disclosure rule.

wealth.com welcomes Kathy Wunderli in private wealth push
wealth.com welcomes Kathy Wunderli in private wealth push

The top estate planning platform's veteran hire will lead its legal team's efforts to develop estate planning, tax analysis, and wealth transfer solutions for ultra-high-net-worth clients.

Morgan Stanley loses $843,000 investor claim stemming from 'gold bar' scam
Morgan Stanley loses $843,000 investor claim stemming from 'gold bar' scam

“If Morgan Stanley had called my client’s son, this wouldn’t have happened,” the investor's attorney said.

LPL welcomes $630M sibling advisor duo from Corebridge
LPL welcomes $630M sibling advisor duo from Corebridge

Meanwhile, Ameriprise has bolstered its own ranks as an LPL defector joins its branch channel in California.

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.

SPONSORED Why wealth advisors should care about the future of federal tax policy

Blue Vault features expert strategies to harness for maximum client advantage.