American States on the brink of financial catastrophe

In the third year of the worst recession since the 1930’s many States totter on the brink of catastrophe, after generations of imprudent management.  Ahead lie even greater challenges, as employees cash in on their insanely generous pensions.  A few charts tell the tale — showing America’s most profligate states — from “The State of California – the road ahead”, Barclays Capital, 17 February 2010:

What does the future hold for California?

What went wrong?

We held elections every 4 years, and selected representatives who would spend more than we wanted to pay — borrowing the difference.  We ignored candidates who warned that this would end badly.

What to do?

Acknowledge that we’re responsible.  That’s the first step to citizenship.  Or we can whine.  Blame bad guys.  Elect more representatives who pander to our weakness.

Which path do you think will lead to prosperity?

For more information

About the condition of our States:

  1. Nightmare scenarios haunt states“, Stateline, 14 December 2009
  2. Illinois enters a state of insolvency“, Crain’s Communications, 18 January 2010
  3. State of the States 2010: How the Recession Might Change States“, Pew Center on the States, 11 February 2010
  4. Speech by New Jersey Governor Chris Christie:  New Jersey is in a state of financial crisis, 11 February 2010
  5. The Trillion Dollar Gap: Underfunded State Retirement Systems and the Road to Reform“, Pew Center on the States, 18 February 2010
  6. The Municipal Market“, Rick Bookstaber (Senior Policy Adviser at the SEC), his blog, 4 April 2010 — A warning from someone who knows.

About California:

  1. California crisis by the numbers – 12, 5, 30, 2, 732, 5.5, 121“, John Chiang (Controller of the State of California), San Francisco Chronicle, 11 February 2009
  2. The Golden State isn’t worth it – Our high-benefit/high-tax model no longer works, especially compared with low-tax states like Texas“, William Voegeli, op-ed in the Los Angeles Times, 1 November 2009
  3. The 2010-11 Budget: California’s Fiscal Outlook“, California Legislative Analyst’s Office, 18 November 2009 — Grim reading.
  4. California’s Choice“, Kevin Drum, blog at Mother Jones, 19 November 2009 — Spending on education or prisons?
  5. California at the Brink of Financial Disaster“, Michael E. Genest (California Director of Finance), 13 January 2010
  6. Dear Voters: Find Another $6 Billion“, John Myers, KQED, 24 March 2010 — Voters’ fantasies about the budget deficit.
  7. $500 billion pension gap:  “Going For Broke: Reforming California’s Public Employee Pension Systems“, Stanford Institute for Economic Policy Research, April 2010


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1 thought on “American States on the brink of financial catastrophe”

  1. Important reading: "California and Bust " by Michael Lewis, about the coming defaults on municipal bonds and pensions

    More evidence that this article was prescient: “California and Bust“, Michael Lewis, Vanity Fair, November 2011 — Summary:

    The smart money says the U.S. economy will splinter, with some states thriving, some states not, and all eyes are on California as the nightmare scenario. After a hair-raising visit with former governor Arnold Schwarzenegger, who explains why the Golden State has cratered, Michael Lewis goes where the buck literally stops — the local level, where the likes of San Jose mayor Chuck Reed and Vallejo fire chief Paige Meyer are trying to avert even worse catastrophes and rethink what it means to be a society.

    The imporant content starts on page 4 with City of Broken Dreams (about San Jose).

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