Monday, November 24, 2008

Wall Street Journal: States Cut Services for Elderly, Disabled

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One of our early calls in 2007, and big themes for 2009 will be the state budget catastrophe.

I wrote in [Dec 16 2007: California in a State of Emergency - Coming to a Theater Near You]

Here it begins folks.... as I stated in this week's piece [The Web of Credit Snares Another: Cleveland] One point I forgot to mention in the 2008 1st half predictions piece is the role of ever decreasing housing values on state (and city) revenue. A large part of revenue inflows is based on an asset (real estate) that is decreasing throughout the country. Budgets (and benefits) are set to recent 'good times'. Like most enterprises very few government institutions will save for coming rainy day times - they just assume the good times will continue to roll. But when they don't, they are in trouble. Especially if a very large revenue source starts to shrink (property taxes). And this should be happening over the next few years throughout the country.

What's the solution? Print more money. Wait. You can only do that at the federal government level. So I guess the solution is.... well, I don't know what the solution is.

I don't know when (or hey, even if) the equity markets will finally come to the realization of the scope of the coming damage, as the bond markets obviously have. But this is only 1 of many shoes. Again, do you expect home values to go up in 2008? How will California's 2009 budget look? In just over a month the projected shortfall in CA has risen from $10 billion to $14 billion. Give it another 12 months... as many people sitting on overinflated 'assets' are finally going to sell at 20-30% lower prices.


I wrote in [Apr 25: Shoes Beginning to Fall in the States],

This is a theme I have been promoting for a while, and it's going to hit this year, next year, and 2010. Unlike the federal government who fixes all fiscal emergencies by simply printing money out of thin air or taking hat in hand to China, Middle East, or anyone who will buy our Treasuries, the states do not have that luxury.
Again, I keep repeating this: The pundits who are telling you we either have shallow recession or are coming out of recession are the same fellas who denied recession was even possible 6 months ago. How the same people who denied a recession was even possible, now have the cajones to tell us don't worry, we are going to be out of it by end of summer, is beyond me. Credibility = zero. We are in fact just beginning our "regional recession". Think 2nd inning, not 9th.

I wrote in [July 25: WSJ: States Slammed by Tax Shortfalls],

So here we are - the new fiscal year begins in July 2008 and CNBC's long touted 2nd half 2008 recovery is upon us! Oops. Not so much. As tax revenue from both the home "fake boom" and consumer spending "fake boom" dwindle, state and local budgets are now becoming an issue. And we have not even faced the real "unemployment" depths that will be hitting within the next 12-18 months. Budget year summer 09 to summer 10 is going to make this year look like a picnic.

And so we begin the 2 solutions: tax increases and service cuts. Oh wait, there is a 3rd solution - federal bailouts of individual states, cities, et al; but not yet. For now, the Wall Street Journal reports - the service cuts begin in earnest. These are all incremental steps in Pooring of America, or reduction in lifestyle for many parts of the society. I do believe the first generations who due to the obligations coming and the decisions made in the past as a nation, will not live as well as their parents... some will view these events as a cyclical situation, I'd argue some of this will be very secular in nature. We're broke - at the federal, state, and city level - the rainy day has come and many rainy day funds were never created or raided during the good times. Still in denial stage - once we begin to live within our means as opposed to over it, that will mean a reduction in lifestyle for many.
  • Faced with widening budget shortfalls, several states are rolling back support services for the elderly and disabled. The move is making it tougher for them to continue living on their own, advocates say. At least 15 states, including Alabama, Virginia and Massachusetts, are targeting such funding, mostly for programs that allow low-income shut-ins to receive personal care -- like cooking, cleaning and basic health services -- in their own homes.
  • The cutbacks are exacerbating the already long waiting lists for home-care support services in many states. That leaves the low-income elderly and disabled to dip into their meager incomes to hire their own help, reach out to family or charity, or seek more restrictive and expensive care in a nursing home, advocates say.
  • As the economy falters, declining revenues and tax receipts have led state agencies to cut spending, with 41 states facing current or looming deficits, according to the Center on Budget and Policy Priorities.
  • "The call volume is increasing exponentially and the people are desperate," (social acrimony - another big theme - coming to a community near you)
  • In Onondaga County, which includes Syracuse, N.Y., the numbers of the elderly waiting to receive homemaker services tripled this year to 60, as the state struggles with budget problems. The Council on Aging of Southwestern Ohio says it took a 4.5% cut in funding for home-care services, but has so far avoided service interruptions by keeping provider rates flat. The state of Virginia just stopped annual subsidies of $500 to people caring for the needy free of charge.
The rest of the story has a lot of specific examples of people affected, and specific services being cut but you get the idea.

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