Monday, December 29, 2008

Nixon Waiting For Federal Funds?

Incoming Missouri Governor Jay Nixon has said he will not tap into Missouri's "Rainy Day Fund" in order to make up for expected budget shortfalls.

Local legislators, State Sen. Jeff Smith and State Rep Jamilah Nasheed, have been pushing the Governor to tap into the half-billion dollar savings account the State has built up for use in emergencies. The state has not dipped into and not used since the massive floods in the early 1990's.

The Obama transition team has indicated it wants to channel much of the proposed stimulus fund into things like infrastructure, much of which will be funneled through states, many of which are facing difficult cuts due to revenue shortfalls.

Economist Paul Krugman enthusiastically endorses this idea. Krugman notes that if the states continue their cuts-mostly due to mandatory balanced budget rules such as Missouri's which leaves states little room-and the federal government doesn't help make up the shortfalls, the economy could continue to stagnate. States and the organizations they fund-directly or indirectly-are already laying off employees, thus adding energy to the downward spiral.

- Murphy

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