While the precarious financial situation of California gets the majority of the press coverage, it is only one of many potential defaults making investors nervous. An article in the Financial Times reports growing signs that many regional deficits are beginning to resemble those of the eurozone countries.
Forty-six states have just begun fiscal year 2011 and for most the news isn’t just bad, it’s catastrophic. According to the Center on Budget and Policy Priorities, those states are “facing a Greek-like crisis.” And for all excluding Vermont, local statutes require a balanced budget. It’s not that the leaders haven’t made an effort to trim expenses; more than 230,000 state and local government jobs have been eliminated in the past two years, with thousands more occurring each month. Mark Zandi at Moody’s has estimated that states could come up short by almost $200 billion next year, resulting in the loss of almost a million more jobs. Others say the losses could be double that number.
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