States buckling under revenue crash

Editor's Note: The following report is excerpted from Jerome Corsi's Red Alert, the premium online newsletter published by the current No. 1 best-selling author, WND staff writer and columnist. Subscriptions are $99 a year or $9.95 per month for credit card users. Annual subscribers will receive a free autographed copy of "The Late Great USA," a book about the careful deceptions of a powerful elite who want to undermine our nation's sovereignty.

States are suffering unprecedented budget deficits, largely because tax revenues in the current recession have fallen precipitously, Jerome Corsi's Red Alert reports.

"Shortages of revenue reflect the economic reality that tax revenues flow not from high tax rates, but from robust business activity and the jobs that in America are typically created by small businesses," Corsi wrote.

Corsi noted that the state budget crisis is certain to become a political hot potato for the White House, which so far has refrained from providing federal guarantees to the states' ability to borrow funds in the municipal bond marketplace. At the same time, states like California that are saddled with large and growing budget deficits are facing credit-rating downgrades that increase the cost of borrowing.

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New analysis of tax data published by the Financial Times shows that of the 50 states, 49 reported declines in tax revenue during the first quarter 2009.

According to the Rockefeller Institute of Government State, tax collections for the first quarter of 2009 showed a sharp drop of 11.7 percent, the largest decline in the 46 years for which quarterly data are available.

Early figures for April and May 2009 reveal an overall decline of nearly 20 percent in state tax revenues, "reflecting a further dramatic worsening of fiscal conditions nationwide," according to the institute report.

The sudden and dramatic drop in state tax revenues is causing states across the nation to cut back on social welfare services.

Red Alert has previously reported that deep budget cuts may force California school districts to lay off thousands of teachers, expand class sizes, close schools, eliminate bus service, cancel summer school programs, shorten the academic year, close more than 200 state parks and release thousands of prisoners early.

In the same article, Red Alert pointed out that California's budget crisis is both a crisis in illegal immigration and a crisis in welfare.

California, with 12 percent of the nation's population, has a disproportionate 32 percent of the nation's welfare recipients. If California mirrored the rest of the country, 869,000 fewer of its residents would be on welfare, with the result that the nation's welfare caseload would be almost 23 percent lower.

In January, California Controller John Chiang announced his office would suspend tax refunds, welfare checks, student grants and other payments owed to Californians starting Feb. 1, as a result of the state's budget crisis.

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In July, California began issuing IOUs to taxpayers owed refunds, vendors, student grants and welfare checks.

A study by Rasmussen showed that nearly two-thirds of California's voters (64 percent) say illegal immigrants put a significant strain on the state budget as lawmakers in California struggle to close what is now admitted to be a $26 billion state budget deficit.

Furthermore, 65 percent of all voters in California believe the availability of government money and services draws illegal immigrants to California, according to the Rasmussen poll.

Is the worst in the state budget crisis yet to come?

The Financial Times created an interactive graphic showing state-by-state that "Falling revenues from income and property taxes leave U.S. states facing new budget shortfalls and will likely force state legislators to make difficult decisions, including cutting spending on essential services such as health care, education and welfare."

According to the Financial Times, the following 12 states will face the most serious budget crises (deficits above 20 percent of total state budget) in 2010, ranked according to the highest percentage of the projected budget deficit:

Corsi wrote, "These numbers are sobering for anyone who considers the current economic recession anywhere near over."

Red Alert's author, whose books "The Obama Nation" and "Unfit for Command" have topped the New York Times best-sellers list, received his Ph.D. from Harvard University in political science in 1972. For nearly 25 years, beginning in 1981, he worked with banks throughout the U.S. and around the world to develop financial services marketing companies to assist banks in establishing broker/dealers and insurance subsidiaries to provide financial planning products and services to their retail customers. In this career, Corsi developed three different third-party financial services marketing firms that reached gross sales levels of $1 billion in annuities and equal volume in mutual funds. In 1999, he began developing Internet-based financial marketing firms, also adapted to work in conjunction with banks.

In his 25-year financial services career, Corsi has been a noted financial services speaker and writer, publishing three books and numerous articles in professional financial services journals and magazines.

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