State budgets under stress: Paths to sustainability, by Richard H. Mattoon, senior economist and economic advisor. Federal Reserve Bank of Chicago, Chicago Fed Letter, October 2011
“State governments have been noticeably absent in contributing to U.S. economic growth since the recession of 200809. Despite some recovery in tax revenues, many states are still reporting budget shortfalls and spending pressures for pensions and health care. Fiscal stress at the state level is filtering down to local governments in the form of reduced aid, and this in turn is reflected in the loss of 539,000 state and local government jobs since August 2008. Are these budget woes primarily due to the fallout from a particularly harsh recession or are they the result of underlying structural problems in the state government sector that require new policy responses?”
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