Investeens

As reported by the Wall Street Journal, state and local tax revenue is now back up to levels that collections were at years ago.  This gain has been credited to the now "recovering" economy as well as the various tax increases that occurred during the recession.

However, interestingly enough, the Wall Street Journal describes how although this increase is obviously good news, it might mask one of the major problems for state and local governments.  The article asserts that as a result of this improvement, people might forget the idea that the only reason why state governments were able to overcome the recession was because of federal stimulus money; not because of any austerity measures being implemented.

Basically, the article brings up the idea that states failed to implement any sort of painful budget cuts that could have balanced the budget.  Instead, they used the federal stimulus money to solve the problem.  This creates potential for a problem arising later on.  Demand for government services continues to grow, demand for public-worker pensions will continue to grow, and demand for health care will continue to grow, all while the state governments slowly start to drive themselves back into debt.

Of course, some states have made cuts to public-worker pensions.  Look at Wisconsin where Gov. Scott Walker created a media frenzy with his attacks on collective bargaining as well as decreases in public workers' wages.  The solution for the state budget problem is all about balancing out the two options of action or inaction regarding overspending.

SOURCE: Wall Street Journal