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Opinion
Oct. 12, 2008
Copyright © Las Vegas Review-Journal

EDITORIAL: Next in the bailout line: the states

And California will be right up front

Washington is throwing so many fiscal lifelines to so many sectors of the economy, taxpayers are growing numb to the numbers involved.

To apply a little inflation to a familiar quotation: A trillion here and a trillion there; pretty soon you're talking about some real money.

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    • Nary a soul squealed about the $25 billion rescue of U.S. automakers two weeks ago. Such a proposal would have spurred outrage from all corners of the country as recently as this spring. These days, $25 billion is the equivalent of pocket change spent at a garage sale.

    Now a new constituency is preparing to take advantage of the public's bailout fatigue and line up at the Capitol pleading poverty: state governments.

    The economy has delivered huge hits to state revenues from coast to coast, leaving billions of dollars worth of budget shortfalls. Most states, Nevada among them, are cutting spending to balance their budgets. A few are already in debt from borrowing to cover previous deficits. All are paying the price for overspending during good times and providing public employees with fattened wage and benefit packages.

    According to a study released last month by the Center on Budget and Policy Priorities, 31 states are facing revenue shortfalls of a combined $53.4 billion. California carries the biggest share of that burden, with the largest deficit in total dollars and as a percentage of its total budget: a $22.2 billion gap that amounts to 22 percent of general fund spending. Nevada, by comparison, has a $1.2 billion shortfall for the 2007-09 biennium, which represents about 16 percent of the general fund budget approved last year.

    California's problems run so deep the state can barely make payroll, and the credit crunch has closed off the availability of short-term loans. So Republican Gov. Arnold Schwarzenegger has written to Treasury Secretary Henry Paulson, warning that he likely will need a $7 billion emergency loan from the federal government to cover California's operating costs. If the aid doesn't come, the state might have to pay workers with IOUs or lay off tens of thousands of them.

    His argument sounds a lot like the ones Mr. Paulson made on behalf of financial giants Bear Stearns and AIG: California is simply too big and too important to the national economy to be allowed to fail.

    And as California goes, so goes the rest of the nation.

    Gov. Schwarzenegger will have a sympathetic audience in Washington. If Congress is willing to hand out more than $1 trillion to help the financial sector purge the toxic mortgage securities that are supposedly poisoning markets worldwide, if Congress has no compunction larding up rescue packages and appropriations bills with tens of billions of dollars worth of pork and tax cuts targeted for their favorites, why wouldn't lawmakers want to spare public schools, welfare rolls, and higher education systems from financial devastation? Other state governments inevitably will fall in behind California seeking aid.

    To which we say: Don't even think about it, Nevada. We have no business borrowing federal tax dollars with no way to repay them. And Californians are fools if they support putting themselves even deeper into the red and keeping their state government on a fiscally unsustainable path. Their government can't cover worker salaries and state operations now, so how in the world will it meet its obligations -- and pay even more interest on its growing debt -- in just a few months?

    Remember, if California is given this loan, all taxpayers are on the hook. Just as responsible Americans who bought homes they could afford and made all their mortgage payments on time are furious that they're now expected to pay for the greed of others, residents with stable state governments now might have to share the infuriating burden of bailing out their big-spending neighbors.

    Nevadans are taking more than their share of licks these days, thank you very much -- according to the Rockefeller Institute of Government, no state economy has fallen farther since January 2007. Nevada's citizens and its governments are making the required sacrifices. Hundreds of thousands of Californians have moved here over the past few decades to escape the tax and regulatory burdens of the Golden State.

    They've already made their full and final payment for California's anti-business policies and runaway government growth.

    The federal government has got to draw a line on bailouts somewhere, and it can begin with the borders of the 50 states. Otherwise, why have states in the first place?



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    Dave wrote on October 12, 2008 11:00 PM: Come on guys, where do you think Federal money comes from? It comes from the States! That is why they should do away with the majority of the Federal government. Somehow money from the states ends up there and it then becomes the magic "Federal Money" Once money gets to Washington, it doesn't come back unless it has pork added to it. The whole thing is wrong. We cannot even get a clean bailout bill without unrelated attachments. That is with EVERYBODY LOOKING!


    Dave wrote on October 12, 2008 10:51 PM: Let them screw it up, it will just make Nevada look better. CA has a lot more hurt coming on, they are just going to have to suck it in.


    abe s. wrote on October 12, 2008 07:59 PM: That will be the day when I help those California-phonies. In case you haven't learned yet CA people-we Nevadans hate Californians-always have and always will!


    HELENWEILS wrote on October 12, 2008 05:12 PM: Sorry, California. Thanks but no thanks.


    K2 wrote on October 12, 2008 02:16 PM: I'm with Herb on this one. What ever happened to moving with the jobs? California just may have more people than jobs available therefore contributing to welfare and unemployment benefits. I've thought that for years. Enforce some immigration laws and see what happens. Lets get rid of every sanctuary city in California before we even consider helping them.


    RHG wrote on October 12, 2008 10:40 AM: Well, this shouldn't surprise anyone. Just like the tobacco lawsuits, once the tobacco companies opened their wallets the states jumped him for a their piece of the action, Nevada included. I have read where one prison guard in California costs the state $73,000 a year in wages and one of the most powerful unions in the state is the "Prison Guards Union". I call it "The Prison Industrial Complex". I have also read where California's overcrowded prison system asked convicts to voluntarily transfer to prisons out of the state to save on cost. Guess who put and end to this? That's right, the prison guards union because less convicts means less prison guards and less prison guards means less dues paying members and less dues paying members means less power. Multiply this with the generous pay and benefits the state of California hands out to other government employees and the unions that represent them and you can see why they are in the situation they are in now. And now the Governnater has his hand out for tax money collected from other states to help pay his employees who won't even consider having their generous wages and benefits cut back. I say absolutely not. Everybody has to learn to tighten their belts and live with in their means, it's time greedy Californians learn this lesson as well.


    Herb wrote on October 12, 2008 10:09 AM: The federal government should NOT bail out states at taxpayers expense. What California needs to do is drastically cut their welfare state. Taxpayers in other states should not pay one penny to support the freeloaders in California.


    grumpy wrote on October 12, 2008 09:29 AM: Any state that goes begging hat in hand to the fed should have their budgets audited before receiving anything. There's a lot of waste out there.


    abe s. wrote on October 12, 2008 08:28 AM: It's time to raise the gaming tax! If I have to reach into my wallet,so should the greedy "gaming" companies!


    publius wrote on October 12, 2008 07:50 AM: I guess I'm confused - why woulnd't NV want to gets its share of a Federal bailout? Nevada already gets less then a 1:1 return on its tax dollars, at least the state would be getting something back...