TOPICS > Economy

States Grapple With Unique Difficulties in Economic Downturn

January 27, 2009 at 6:25 PM EDT
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As the impact of the economic downturn ripples across the U.S., four public broadcasting reporters describe how the recession has impacted their states and local communities.

JEFFREY BROWN: The Labor Department reported today that all 50 states saw rises in their unemployment rates last month. Eight of them had jumps of more than a full percentage point, and two — Michigan and Rhode Island — have now hit double digits, more than 10 percent unemployment.

All this as the stimulus plan is debated here in Washington, with money for the states — potentially a lot of it — on the table.

We talk about all this now with public broadcasting journalists covering their states: Helen Ferre, the host of WPBT’s series “Issues” in Miami, Florida; Julie Philipp is managing editor of WXXI-TV in Rochester, New York; Federica Freyberg, reporter and anchor for Wisconsin Public Television; and John Myers, Sacramento, California, bureau chief for KQED Public Radio.

Well, Helen Ferre, I want to start with you. I understand your state legislature just held a special session on its budget problems. Tell us how the economic crisis is hitting programs and services there.

HELEN FERRE, WPBT Host: Well, I would say that, as most states go, everything is being greatly affected by the downturn in the economy. Florida has a $2.3 billion budget shortfall, which was just taken care of and addressed in a special legislative session.

Republican Gov. Charlie Crist has indicated that he might be vetoing some of these cuts, particularly in the area of education, which has been one of the hardest hit.

But, of course, that’s not the only area that’s been hit. You also have the hit in health care and Medicaid recipients are going down. Even affordable housing money that was being allocated has also been cut.

So you really see a dire need for a stimulus package coming from Washington. The state’s certainly hopeful for it. But it’s all about job creation; that’s what most people are hoping for.

JEFFREY BROWN: All right, let me go to Federica Freyberg in Madison, Wisconsin. How hard, how fast are you feeling it there?

FEDERICA FREYBERG, Wisconsin Public Television: Well, it’s really starting to hit now. And we’re told by experts, economic experts that we have not hit bottom yet.

The state of Wisconsin faces a budget deficit over the next two years of $5.4 billion. Now, this is a result of lowered projected tax revenues, most notably sales tax and corporate taxes.

Now, our governor does not submit his budget or his budget fixes until February, and so we’re all kind of just waiting for the other shoe to drop to determine exactly what this kind of deficit means. Our governor has told us that it will mean deep cuts. It has already meant that he will not be replacing 3,500 state workers whose jobs are now vacant.

We also are looking toward any federal stimulus money to help us here in the state of Wisconsin with this. Our Gov. Doyle has said that he has concerns about maintaining essential services, like police officers and fire departments, but he says that he will do everything possible to protect education, health care, and alternative or renewable energy.

States brace for more layoffs

John Myers
KQED Public Media
Part of that is because of California's long-running political dysfunction over how to solve its budget problems, but the recession really has obliterated tax revenues in the state. We're having real trouble with cash on hand.

JEFFREY BROWN: And, Julie Philipp in Rochester, now, you're in one of those states that experienced a better than 1 percent quick jump in unemployment last month. Are you feeling that kind of speed in terms of the unemployment scene?

JULIE PHILIPP, Rochester Public Media: Yes, you can really feel it starting to snowball. It was sort of out there, but nobody really knew anyone who was being laid off. Well, now every week we add a new company. Today it was Corning, which is about an hour-and-a-half from Rochester, announced it's laying off 3,500 workers. A few days ago, it was Birds Eye Foods laying off 35 workers.

So every day, it just continues to grow, the list of companies laying off workers.

JEFFREY BROWN: And staying with you, what is the impact on government coffers at this point? Can you feel it there?

JULIE PHILIPP: Well, as Wall Street goes, so goes New York. Wall Street accounts for about 20 percent of New York state's revenue. We're looking at a $15 billion budget deficit this year.

The governor has proposed $9 billion in cuts. Dollar-wise, it's going to hit hospitals, health care providers, and educators the most, but everybody is getting hit.

Our story today was zoos. They're going to lose all of their state funding under the governor's proposal. He's also proposed about $4 billion in taxes, fees and fines, everything from an iPod tax on the songs you download to an 18 percent obesity tax on non-diet sodas.

JEFFREY BROWN: And, John Myers in Sacramento, I guess we've all heard a lot about California's budget problems. You're facing a lot of painful decisions there, right?

JOHN MYERS, KQED Public Radio: Indeed we are. You know, California is the eighth-largest economy in the world, and we like to brag about that. We also, unfortunately, have the largest in actual dollars -- the largest budget deficit of any state in the country.

The projection is $40 billion over the next 15 months; that actually could get worse in the next few weeks when we get some new data.

You know, part of that is because of California's long-running political dysfunction over how to solve its budget problems, but the recession really has obliterated tax revenues in the state. We're having real trouble with cash on hand.

As a matter of fact, next week, the state's comptroller has said he probably won't be able to pay some state services, some state invoices that are out there. By the end of February, we could be issuing IOUs, which we've only done once since the Great Depression in California.

And it could get even worse. The state comptroller has said he probably will delay income tax refunds to Californians trying to preserve some cash on hand to pay for vital state services.

JEFFREY BROWN: And, John, I know that this is also hitting some very high-profile industries. They had a high-tech industry, for example. We had some reporting on our show on that. That has -- that has implications for tax revenues, as well, I guess, right, and for government spending?

JOHN MYERS: It really does, because California's tax structure is a fairly volatile one. And we really kind of live and die on some of those really high-profile industries.

High-tech is a great example. You know, Intel has announced layoffs. As you know, Google has announced layoffs. And those have a real impact on those tax revenues, personal income taxes, capital gains profits. Of course, when the stock market went down, we had a big suffering there.

And we've been talking about unemployment, I know, with some of these other folks from around the country; 9.3 percent is the latest number here in California.

So we have a lot of problems ahead of us. And Gov. Schwarzenegger and legislative leaders trying to figure out what to do as we speak.

Infrastructure projects are key

Helen Ferre
WPBT, South Florida Public TV
[Miami Mayor Manny Diaz] has done a great job in promoting the use of infrastructure as a way to re-stimulate the economy and provide jobs, especially in service sector industries such as construction, to be able to provide growth.

JEFFREY BROWN: Now, back to you, Helen Ferre, in Miami. You raised the stimulus plan that's now being debated here in Washington. How does it play out where you are? What is the expectation for how money that may come to the states or your state, how would it be used? What do people hope for?

HELEN FERRE: Well, you have to remember that the president of the National Conference of Mayors is Miami Mayor Manny Diaz. And he's done a great job in promoting the use of infrastructure as a way to re-stimulate the economy and provide jobs, especially in service sector industries such as construction, to be able to provide growth.

And there's a lot of hope that the infrastructure package, that component in and of itself will do a lot for the state of Florida, because construction is one area, because of the housing market being in the dire crisis that it's in, has really hit the construction market in a terrible, terrible way.

Florida in November had 7.4 percent unemployment. In December, it jumped to 8.2 percent. It also leads the nation -- it's one of the leading states in foreclosures.

So one of the things that's also being looked at in the stimulus package is something that will also come in addition to what's being used with the TARP funds so that we'll have something that will stabilize the mortgage crisis. Can something be done to take away some of the toxic mortgages to help provide some balance there?

The big issue, of course, is that, assuming the stimulus plan gets passed -- and we don't know all of the details yet -- while the mayors and Mayor Diaz would tell you that they would hope that they would be able to get the money to use the money as they would like for their projects, roads, buildings, but education is also being put into that, as well.

The money is going to go to the governors, because it's easier for Washington to deal with 50 governors than to deal with 1,200 mayors.

JEFFREY BROWN: Well, Federica Freyberg, what's the expectation there, in terms of a stimulus plan and what it might bring to your state?

FEDERICA FREYBERG: Well, I know that our governor, Jim Doyle, submitted a wish list originally to Washington of some $3.7 billion for highway, education, environmental, and energy projects.

And the bill that has been released publicly that we've been taking a look over suggests that Wisconsin could see about $1.1 billion in direct state funds to the state, $1.1 billion for Medicaid, $800 million for that infrastructure, roads, and bridges, and trains, and then nearly $500 million for school programs.

Our governor, Jim Doyle, has been working very closely with our congressman, Dave Obey, who is, of course, the chair of the House Appropriations Committee, which is handy for our governor to be able to work so closely with him fashioning this stimulus bill, as it will affect the state of Wisconsin.

And our state has also just put together its own agency. It's called the Office of Recovery and Reinvestment. They're calling it kind of a stimulus bill SWAT team.

They've put these people together who can take a look at the federal stimulus package and then get projects in line to go right away so that they don't lose the money, because apparently there are provisions in this federal bill, use-it-or-lose-it. And so they want to have these projects really ready to roll the minute this bill passes out of Washington.

Benefits to private sector

Julie Philipp
WXXI, Rochester Public Media
All cities have come up with lists of similar types of projects to what you've heard: environmental, infrastructure, building projects, things that put people and businesses back to work.

JEFFREY BROWN: Julie Philipp, is there also the expectation that some of the money may trickle -- not trickle out, but help the private sector, as well? We've been mostly talking about how it will impact government programs. How does it get to private industries that are hurting where you are?

JULIE PHILIPP: Well, U.S. Sen. Chuck Schumer says that New York stands to get maybe $10 billion to $15 billion from that stimulus package. He wants to see most of it going directly to cities. All cities have come up with lists of similar types of projects to what you've heard: environmental, infrastructure, building projects, things that put people and businesses back to work.

A little bit, a couple billion, would be set aside to help balance the state budget, a couple billion also for education. But most of it would go toward creating infrastructure and green jobs.

JEFFREY BROWN: And, John Myers, same question. How does it affect -- how is it looked at in California? How does it pass through to the private sector, as well as the state coffers?

JOHN MYERS: Well, I think it's a great question. And, of course, we have to see how the bill comes out, but the current estimates are about $21 billion of that stimulus plan would come back to California.

The thinking is that between $10 billion and $15 billion of that would actually go to try to help resolve our state budget deficit, but we are talking about a lot of money for infrastructure. And Gov. Arnold Schwarzenegger has talked a lot about projects that he calls shovel-ready, that he says that we're ready to go as soon as we have the money.

And I think that is seen as one way to really try to stimulate the economy, in terms of construction jobs and all of these things on the local sector that could translate back into revenues that the state needs very badly.

Consensus problems on stimulus

JEFFREY BROWN: John, I'm curious about one other thing. I think you were all listening. We just had a discussion in the program about bipartisanship here in Washington. Out where you are, is there any sort of -- how does this play as a political factor? Is there a consensus on what should be done?

JOHN MYERS: Consensus is hard to reach in California; it has been for some years. You know, Arnold Schwarzenegger has thrived on being a post-partisan nature in government. As a matter of fact, I think the new president likes to use that term now, as well.

But the governor has been a bit of a party of one. Even though he's a Republican, he doesn't seem to get -- you know, he has trouble with his Republican lawmakers and Democrats have had problems, as well. And so we really don't have a lot of bipartisanship at this point. We are looking to Washington for a lot of things.

And I think, if nothing else, we might be looking for a way to solve some of these problems, for some way of compromise that we might be able to use as a template here in California, which is a very large state. And I think, you know, we feel that, as California goes, sometimes so goes the nation. And if we could get our economy going, it might have a big boom nationwide.

JEFFREY BROWN: And, Helen Ferre, do you have a brief response on that one, same question about the political consensus?

HELEN FERRE: Well, I think that there is an issue, that there is a great desire for the Obama administration to be able to be successful with the stimulus plan. But it's uncharted territory, and I think there's a lot of concern.

You had Miami Congresswoman Ileana Ros-Lehtinen, and she was expressing her concern. And part of the issues that you're seeing here is that the job creation is being put from the government sector, whereas you're finding that Republicans wish that it would come from the small-business sector, which 70 percent of jobs do grow and come from that area.

And how do you make the business -- and how do you make these infrastructure jobs, you know, relate to those who are in the white-collar industry and the financial industry who have lost their jobs? How are they going to be able to benefit from this? These are some of the issues that create consensus problems.

JEFFREY BROWN: All right, I want to thank all four of you, Helen Ferre in Miami, Federica Freyberg in Madison, Julie Philipp in Rochester, and John Myers in Sacramento, thanks a lot. Thanks, all of you.