States are struggling

ATLANTA (AP) — With the nation's economy at its healthiest since the Great Recession, a surprising trend is emerging among the states — large budget gaps.

An Associated Press analysis of statehouse finances around the country shows that at least 22 states project shortfalls for the coming fiscal year. The deficits recall recession-era anxiety about plunging tax revenue and deep cuts to education, social services and other government-funded programs.

The sheer number of states facing budget gaps prompted Standard & Poor's Ratings Service to call the trend a sort of "early warning."

"After all, if a state is grappling with a budget deficit now, with the economic expansion approaching its sixth anniversary, what will be its condition when the next slowdown strikes?" credit analyst Gabriel Petek wrote in a recent report.

The forces at work today are somewhat different than when the recession took hold in 2008. In some states, revenue growth has been stagnant, missing projections and making it difficult to keep pace with expanding populations and rising costs for health care and education. Other states have been hurt by a steep decline in oil prices or seen their efforts to promote growth through tax cuts fail to work as anticipated.

The result is a nation divided between states such as California and Colorado that are riding the wave of the economic recovery and others such as Illinois and Pennsylvania that appear closer to bust than boom.

A majority of states have failed to climb back to their pre-recession status, in terms of tax revenue, financial reserves and employment rates, said Barb Rosewicz, who tracks the fiscal health of states for The Pew Charitable Trusts.

Alabama, for example, faces a $290 million shortfall after a voter-approved bailout expires at the end of the current fiscal year. Projected cuts would create a $27 million hole in the state's court system, forcing more than 600 layoffs and leaving just one juvenile probation officer and two clerical staffers in each county, said Rich Hobson, administrative director for the Alabama Unified Judicial System.

If nothing is done, the courts will not have the staff to send jury notices, monitor juvenile delinquents, process protection orders and collect and distribute child support payments, he said.

"This is an insane proposition," Hobson said. "The public would suffer."

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looks like the band-aids that they have been putting on for the last 7 years are about to get ripped off

everyone seems to be worrying about greece, while we have an issue right at our front door

As U.S. investors have been panicking over a potential Greek collapse, Puerto Rico’s governor Sunday announced that the small U.S. territory cannot pay its roughly $72 billion in debt.

Less than 24 hours later, Gov. Alejandro Garcia Padilla proposed a plan to seek a restructuring of the island’s debt, suggesting that the island is virtually insolvent.

A long-awaited report compiled by former International Monetary Fund staffers brought the Puerto Rican debt crisis back into the spotlight.

The report concluded that the U.S. commonwealth has lost the ability to fund itself through public debt markets, while pointing to what the authors described as “a decade of stagnation, outmigration and debt.”

Although the Puerto Rican debt crisis is no secret to residents of the island, the governor’s statement essentially was the first official opening for a renegotiation of the debt, said economist Carlos Soto-Santoni, president of Nexos Económicos, a Puerto Rico-based consulting firm, and deputy adviser for former Governor Rafael Hernández Colón’s administration.

But the problem is that, as per the U.S. constitution, Puerto Rico cannot file for Chapter 9 bankruptcy, like Detroit did, and neither can its public corporations and local agencies, Soto-Santoni added.

So the governor is basically seeking a negotiated agreement with bondholders for a postponement of payments on the debt for a number of years.

The question that remains unaddressed, however, is what would revive growth on the island, as gross domestic product per capita is dwindling while debt per capita has been rising.

“In that sense, Puerto Rico is just like Greece,” Soto-Santoni said.

But U.S. investors would actually have much more to lose in a potential Puerto Rican default than in a Greek default. The reason is that Puerto Rico’s bonds are trading in the U.S. municipal bond market, while the vast majority of Greek debt is in the hands of the International Monetary Fund, the European Central Bank and eurozone countries.

more http://www.marketwat.....2015-06-30