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Eye Opener: How the stimulus will hurt states

By Ed O'Keefe

Eye Opener

Happy Thursday! Here's a report worth a moment of your time: At least nine states could soon face economic and fiscal hardship nearly as daunting as California, according to a Pew Center on the States report released Wednesday.

Though the Golden State has suffered from a mix of high number of home foreclosures, sharply declining tax revenue and unemployment levels higher than the national average, other states face similar issues and some localized concerns.

Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin are on watch for serious budgetary problems, the report said.

Part of the problem, as economists, state leaders and other observers have already warned, is that states' fiscal situations will worsen before the national economy starts to recover, and that it will take the states longer to recover from "The Great Recession." But most of all, the temporary relief provided by the economic stimulus program starts to dry up late next year, meaning the states will have to make up the difference.

Localized concerns include Nevada's dependency on the slumping casino industry and Michigan's ties to the auto industry, laws that require state governments to give surpluses back to residents, and other laws requiring two-thirds of the state legislature to approve tax increases. All of these localized issues have helped contribute to the downfall, which the study's authors say could continue for at least another five years.

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Cabinet and Staff News: Ambassador Karl W. Eikenberry resists an increase in troops in Afghanistan. Former Supreme Court Justice Sandra Day O'Connor's husband dies. Former ambassador and current adviser to the Kurds stands to reap big oil profits. Peter Orszag says the deficit has to be cut to 3 percent of economic growth. Education Secretary Arne Duncan and his department come up with a scoring system for school funding.

Not a walk in the park: Despite President Obama's increase in funding, the country's national parks face a substantial deficit and massive infrastructure problems.

HUD threatens to cut DC AIDS funding: Assistant Secretary Mercedes M. Márquez said the department will send a letter to the city this week stipulating that no new AIDS housing money will be awarded unless the city improves its tracking of services and spending.

Fatal Secret Service accident: Two armored vehicles, including a limousine sometimes used by Vice President Biden, struck and killed a man hours before dawn Wednesday as he was crossing rain-slicked Suitland Parkway.

Activists' questions on Sudan answered Web 2.0-style: The State Department partnered with two U.S.-based advocacy organizations to launch AskUS to connect the Obama administration with citizen activists.

White House aims to cut deficit with TARP cash: The administration wants to keep some of the unspent funds available for emergencies, but is considering setting aside a chunk for debt reduction.

Connolly seeks answers on long-term-care premiums, is skeptical about cuts in mail delivery: An interview with the Northern Virginia lawmaker, who's got a seat on the Oversight and Government Reform Committee.

Fed's role makes its next move key: The central bank's activist response to the financial crisis has exposed the Fed to immense political fallout.

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By Ed O'Keefe  | November 12, 2009; 7:30 AM ET
Categories:  Eye Opener, Tracking the Stimulus  
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