California Business Minute™

Hi, I am Tim Johnson and welcome to the California Business Minute.

While it is well known that the state of California has significant budgetary problems,
there appears to be an array of other states that are on the brink of insolvency.

According to a new study from the Pew Center on the States entitled: “Beyond
California: States in Fiscal Peril” identifies nine states that the study asserts
are not far behind the Golden stat in suffering havoc from the ‘Great Recession’.

The nine, alphabetically: Arizona, Florida, Illinois, Michigan, Nevada, New Jersey,
Oregon, Rhode Island and Wisconsin.

The study scored all 50 states based on six factors that "contributed substantially
to California’s ongoing fiscal woes": high foreclosure rates; increasing joblessness;
loss of state revenues; the relative size of budget gaps; legal obstacles to balanced
budgets (specifically, a supermajority requirement for some or all tax increases or
budget bills); and poor money-management practices.

And while California is in a budgetary league of its own and unfortunately and of
course, scored worst of all, it was closely followed by Arizona, Rhode Island and
Michigan, in that order.

Considering that Arizona and specifically Nevada, have  placed advertising aimed at
the Golden State’s business climate, all in the attempt to lure businesses away,
here’s what the Pew study has to say about those two states:

Arizona: "As the economic news grew bleaker and state revenues
sank during the past two years, Arizona’s lawmakers relied on
one-time fixes to balance its budget instead of making long-term
changes. In part, they were hamstrung by voter-imposed spending
constraints, a tax structure highly reliant on a growing economy
and a series of tax cuts, made in the 1990s, that has limited
revenue. At this writing, policy makers still had not decided how
to bridge a $1 billion gap in the current fiscal year’s budget."

Nevada: "Nevada’s unique gaming-based economy is in jeopardy,
as its state budget relies on gambling and sales taxes to provide
60% of its revenues. Year-over-year revenue has fallen for two
consecutive years, a record. But changes to the tax system are
difficult to make because, unlike most states, Nevada has written
some of its tax laws into the state constitution. So increasing the
sales tax or adding an income tax, for example, would be nearly
impossible because it requires voters to amend the constitution."

At the opposite end of the spectrum, Wyoming scored best in the Pew study, followed
by Iowa and Nebraska (tied for second place) and Montana, North Dakota and Texas
(tied for third).

I am Tim Johnson and this has been the California Business Minute.