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Be prepared for continued states budget struggles
WASHINGTON (11/13/09)--Credit unions should be prepared to help members affected by state budget problems through 2012--or longer. According to the National Governors Association, state governments likely will struggle with revenue at least until 2012. And at least one analyst says many state budgets won't recover fully from the recession until much later. That would have continuing implications for credit unions that serve state employees in their states. During this past year's budget impasses in states such as California and Pennsylvania, credit unions whose fields of membership include state employees came to the rescue, with short-term loans, 0% interest loans, deferred payments, special furlough deals, and acceptance of state warrants or IOUs. In fiscal 2009, state revenues fell 7.5%, said the National Association of State Budget Officers Thursday (The Wall Street Journal Nov. 12). The association predicts revenues will continue to decline for one or two more quarters--the worst numbers of the decade. The high unemployment rate, now officially 10.2%, is hitting state coffers where it hurts--in revenue from sales and income taxes. State governments faced $250 billion in budget gaps between fiscal years 2009 and 2011, according to a survey released by the two state associations. States have managed to close $72.7 billion of the gap in 2009 and $113 billion before enacting fiscal 2010 budgets, but that was with help from federal stimulus funds. State governments also have taken measures to cut expenses and raise taxes and fees. Like consumers, the states aren't spending. They cut expenditures by 4.8% in 2009 and are expected to cut at least 4% in 2010. That would be the first time states have cut spending in back-to-back years. According to Raymond Scheppach, executive director of the governors' association, state will struggle with obligations such as funding pension and health-care trusts, maintaining local infrastructure and rebuilding rainy-day funds that the last two years have depleted. States won't fully recover from the recession until late in the next decade, he said.

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