Will State Governments Disappear Without Federal Reorganization?

The disappearance of state tax revenues in the depression collapse, combined with increased urgent service demands arising from mass unemployment, hunger, lack of healthcare, are starting to drive states beyond "budget crisis," to existential threat of disintegration of state government. Again, California under the fascist "Guvernator" Arnold Schwarzenegger, is closest to disaster. President Obama has repeatedly ruled out special aid to the state; economist Lyndon LaRouche has warned that it, and soon other states, must be taken into a kind of Federal bankruptcy protection, or they will not survive as states. LaRouche has also emphasized the leading role California should play in U.S. participation in a Four Power Pacific-oriented economic renaissance, along with China, Russia and India.

Less than six months after a monstrous budget-cutting of $15 billion, combined with new taxes, were forced on the state legislature by Schwarzenegger, California is facing a new $21 billion shortfall. At 10:00 AM PST today, the Legislative Office of the California state government will release its new estimates on revenue collection and the budget. A leak to the Sacramento Bee indicates that next year's budget (Fiscal Years 2010-11) is already facing a $21 billion shortfall. This includes the postponement of an approximate $8 billion shortfall which remains in the FY 2009-10 budget, into the next budget.

A call to a relevant official this morning revealed, amazingly, that the $21 billion shortfall is based on estimates of an economic recovery beginning in January 2010, with a forecast that the revenue shortfall will begin to ease! The official said that this is a "highly unlikely scenario."

Were California to make new budget cuts of this magnitude, it would have eliminated an astonishing near-40% of its total budget spending, in four years—from approximately $105 billion, to approximately $65 billion, in each two-year budget. Competent state authority would not survive.

Other states which, on smaller scales, are similarly threatened include Illinois, Arizona, Pennsylvania, New York, and Virginia. The last, after cutting $7 billion from its $70 billion FY 2009-10 budget, already projects at least another $3 billion shortfall in the next budget, as tax revenues keep falling far below forecasts. All state agency budgets may be reduced by 15%. "These budget numbers are scary. They're going to have a grave impact on the citizens" said one Democratic state delegate.