FROM THE EXPERT:
States Take the Lead on Infrastructure Projects
By Sujit M. CanagaRetna, CSG Senior Fiscal Analyst
The Council of State Governments’ Southern office, the Southern Legislative Conference
As the doleful drumbeat of dismal national economic news emerges daily, states face fiscal challenges of unprecedented proportions. While there continues to be renewed expectation that the federal government in a Barack Obama administration will initiate a massive infrastructure program to revamp, restore and rejuvenate the nation’s crumbling and aging infrastructure—a 21st century New Deal of sorts—state policymakers have not been idle awaiting the inauguration of the new president.
In an effort to spur their moribund economies into action, not only by creating thousands of jobs within their own borders, state policymakers are looking to enhance infrastructure for a speedy way to stimulate the economy. States across the country—including California, Florida, New Jersey, Oregon, Vermont, Washington and Wisconsin—have either passed or proposed new infrastructure projects and injected capital into local banks aimed at providing financing for business ventures at the local level.
Among the proposals:
In Oregon, Gov. Ted Kulongoski announced $1 billion in new transportation projects;
California voters recently authorized nearly $10 billion in bonds to pay for planning and constructing a high-speed rail system linking Sacramento to San Diego that will reduce congestion at California airports, reduce dependence on foreign oil and decrease greenhouse gas emissions;
Ohio voters approved the final element of a $1.6 billion stimulus package that includes $400 million in environmental clean-up; and
In Illinois, State Treasurer Alexander Giannoulias will invest $1 billion of state money in local banks and credit unions so they can provide loans to spur local business opportunities.
Those projects come as the nation’s economic picture continues to be grim. The latest gloomy bulletin: The nation’s gross domestic product shrank at 0.5 percent annual rate during the third quarter (July to September 2008). That’s weaker than the 0.3 percent rate of decline initially estimated in late October 2008. The slipping GDP—which measures the value of all goods and services produced within the U.S. and provides a solid barometer of the country’s economic health—was the worst showing since the economy contracted in 2001 during the nation’s last recession.
The national unemployment rate also grew to 6.5 percent in October, the latest month available, with the unemployment rate in two states—Michigan and Rhode Island—soaring to 9.3 percent each. Twelve more states—California, South Carolina, Nevada, Alaska, Illinois, Ohio, Oregon, Mississippi, Florida, Georgia, North Carolina and Tennessee—recorded staggering rates of 7 percent or more.
Even before all the economic turbulence of the past three months, states were looking at a very depressed financial picture: 29 states bridged budget shortfalls that cumulatively amounted to $48 billion as they enacted their 2009 fiscal year budgets. Barely halfway through the current fiscal year, 31 states faced additional midyear shortfalls amounting to $24.3 billion cumulatively. In all, 41 states are facing or will face fiscal hardships in the 2009 fiscal year and/or 2010 budgets. Furthermore, Moody’s recently reported that 49 states were either in recession or face near-recessionary economic conditions—Alaska is the exception.