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State Budgets: Day of Reckoning (60 Minutes News Video.....A must watch)
- 1) State debt for jobless benefits looming (Ohio)
"Although the battle over extending unemployment benefits has been solved in Washington, Ohio still has no way to repay the $2.3 billion borrowed from a federal loan fund to continue the jobless benefits through the recession.
Without a reprieve from Congress, that bill comes due next year, at the same time state leaders will be grappling to close a projected $8 billion shortfall in the two-year state budget that begins in July. "
"Rising unemployment and lingering recession in many parts of the country have drained state unemployment funds across the nation. Thirty states, including Ohio, and the Virgin Islands currently are borrowing from the federal fund, owing a combined $41.7 billion as of Dec. 13, according to the U.S. Department of Labor. Four other states have paid back their loans.
California has needed the most help, more than $9 billion, while Midwestern states, including Ohio, make up four of the top eight borrowers.
“There is a lot of hope that the feds are going to look at this and say, ‘Hey, we have to look at this differently.’ There is an underlying hope that no one wants to speak publicly about and that’s that the feds will step in,” Doehrel said.
Such a provision, however, has not been included in the tax package Congress approved last week, which also renewed funding for extended unemployment benefits."
- 2) Christie Says 'Day of Reckoning' Has Arrived for State Budgets (New Jersey)
"Dec. 20 (Bloomberg) -- New Jersey Governor Chris Christie said U.S. states face a “day of reckoning” as they contend with looming budget deficits in the wake of the longest recession since the 1930s.
Christie, who cut $1.3 billion in aid to schools and municipalities this year to close a $10.7 billion deficit, said states’ pension and debt costs have grown to be “unsustainable.” Benefits, education and health care will be reduced in many states, he said in an interview aired last night on CBS Corp.’s “60 Minutes.”
“The day of reckoning has arrived,” said Christie, 48, a first-term Republican. Areas such as education and pensions “were third rails of politics. We are now left with no alternatives.”
The recession caused the biggest nationwide decline in state tax receipts on record, according to the nonpartisan Center on Budget and Policy Priorities in Washington. States have filled more than $425 billion in funding gaps since fiscal 2009; the combined imbalance is likely to reach $140 billion in the next budget year, the center said."
- 3) Morici: Downgrade US Treasuries to Junk (CNBC)
"As Washington spends and borrows, the Treasury will have to offer higher rates on new 20 and 30 year bonds, making comparable securities issued in 2010 and earlier worth less in the resale market.
That interest rate risk makes U.S. Treasury securities lousy investments.
For rating agencies, Washington’s monopoly on printing dollars makes difficult assigning a conventional rating between AAA and D on its bonds. Those can’t default but investors’ capital is still at grave risk.
Perhaps a special grade: “F” –flee now before you get stuck—is appropriate for the junk sold by the U.S. Treasury."
"PHOENIX - As bad as the state’s financial problems have been the past two years, the crisis is likely to come to a head in 2011.
When state legislators are sworn in on Jan. 10, they will immediately start working on solutions to wipe more than $2.2 billion in red ink off the books. And, unlike in past years, the federal government won’t be opening up its checkbook to give the state money in order to stave off deep budget cuts.
The first order of business will be an estimated $840 million deficit in the current fiscal year.
Legislative leaders are already crafting a plan to fill that hole and lawmakers will likely vote on it by the end of January. Attention will then shift to a $1.4 billion shortfall in the upcoming budget year, which begins in July.
And, despite what voters were told earlier this year when they headed to the polls in overwhelming support of a temporary sales tax increase, there are almost certain to be massive cuts to education."
"School districts already have crammed more students into classrooms, shortened the school calendar and stopped buying new textbooks.
As bleak as things are for California schools, however, next year stands to be worse.
K-12 schools and community colleges could receive at least $2.2 billion less because of lower state tax rates in 2011, state budget analysts say. To make matters worse, many districts will have less federal aid to rely upon.
The reduction seems to be a foregone conclusion at the Capitol because the state's projected 18-month budget shortfall – as great as $29 billion – would otherwise be higher.
So districts are bracing for another round of teacher furloughs, school closures and the elimination of programs outside the core teaching mission.
"To paint the mental picture, it's as if two people are looking over a forest of stumps, and one person says, 'Let's go get that low-hanging fruit,' " said Elk Grove Unified School District Superintendent Steven Ladd. "Well, there's not even a tree out there.""
- 6) Students bear brunt of state budget deficit (Colorado)
"Parents in Colorado may want to start putting more money into their kids' college fund. Almost all of the universities and colleges in our state are considering double digit tuition increases next year to overcome cuts in state funding."
"Senate Majority Leader John Morse, (D) Colorado Springs says he and his fellow lawmakers must balance the budget, and with a billion dollar deficit, higher education is low hanging fruit."
"Instability in its three pension systems is the greatest threat to Houston's financial solvency, city officials and financial analysts say.
Within three years, according to an actuarial study commissioned by the city, the pension for firefighters will require the city to contribute 45 percent of its payroll costs for that retirement plan, a burden Mayor Annise Parker says is unsustainable.
The other two plans are in even worse shape. The police and municipal employee pensions are underfunded by $2.1 billion, roughly the equivalent of what the city spends annually for public safety and general operations.
"The bottom line is the whole system is completely unsustainable with current benefit levels and the city's financial position," said John Diamond, a Rice University public finance fellow and governmental tax consultant. "
- 8) Auditor warns supervisors of unfunded pension cost (El Dorado County, CA)
"El Dorado County's auditor-controller has issued a warning to the Board of Supervisors about unfunded pension liability.
According to Joe Harn's letter to the supervisors last week, the liability has more than doubled from June 2008 to June 2009, the most recent reported.
The current liability is $264 million, he said.
"It's just an ugly number," Harn said."
"The Federal Reserve said it will limit purchases to 70 percent of any single Treasury security as part of its plan to expand its balance sheet that’s known as quantitative easing.
The central bank had temporarily relaxed its 35 percent limit in November when announcing additional purchases of $600 billion of Treasuries through June. The New York Fed in a statement today gave allowable purchase percentages for three brackets in its system open market account, or SOMA, consisting of securities it holds, from more than 30 percent to 70 percent."
.......................9A) Treasuries Rise for Third Day as Fed Debt Purchases May Break Daily High
"Treasuries rose for a third day in the longest winning streak this month as the Federal Reserve prepared to purchase as much as $17 billion in two operations, the biggest amount in a single day."
"Municipal bond-rating cuts by Moody’s this year also include Los Angeles, San Francisco, Philadelphia and Chicago, after the slumping housing market ate into real-estate values and assessments of property declined.
Across the U.S., local governments collected 1.8 percent less in taxes this year than in 2009, the Washington-based National League of Cities said in an October report. Revenue may continue declining into 2012 as governments lag at least 18 months behind the private sector in feeling the effects of any economic turnaround, the group said."
"LONDON (AP) -- Ratings agency Moody's on Monday downgraded four Irish banks and an insurer, dropping two of them to junk status -- a reminder of the financial mess the country faces at it looks to draw on an international rescue loan.
Moody's Investors Service said it had lowered ratings on bank deposits and senior debt for Allied Irish Banks, Bank of Ireland, EBS Building Society, Irish Life & Permanent and Irish Nationwide Building Society. It also downgraded their bank financial strength ratings and most of the groups' junior securities.
The move came after Moody's on Friday downgraded Ireland's sovereign credit rating by five notches to Baa1 -- just three steps above junk-bond status."
- Other news, headlines and opinion:
French AAA Grade at Risk as Downgrades Sweep Europe
Fears over French Downgrade Restrain Euro
Germany's robust economy not enough to stop record debt
German Public Debt Rises To EUR 1.8tln
EU Plans $17 Billion of Bond Sales for Ireland Bailout, FT Says
China plans 900 billion yuan deficit in 2011 to fuel economy
Stocks Rising 17% Since Bernanke Disclosed QE2 Disarms Fed's Worst Critics
Underfunded pensions dwarf deficit (Connecticut)
California's teaching force shrinks, as K-12 population set to grow
Weak Get Weaker as Muni Bonds Are Sold Off
City waits, frets over $41 million in state aid (Columbus)
City budget cuts hit crunch time (Cincinnati....$60 million deficit)
Incoming Nevada Governor Weighs Deeper Cuts
3 states in regional compact raid pollution funds
20 Companies That Cratered in 2010
Iranian riot police out in force as food and fuel subsidies end
IRELAND NEEDS TO DEFAULT JIM CORR RUSSIA TODAY (Video)
European financials see dollar funding gap widen
School board borrows to pay off pension liability (Wisconsin)
Unintended Consequences (Inflation US Video)
). Any oceanographers out there care to weigh in on the shortcomings of the clip? Doug is all over the climate change material and no doubt has been exposed to oceanographic elements??? 
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