Wednesday, February 24, 2010

The real deficit problem for farmers...

While producers are wringing their hands about trillion-dollar federal deficits with vague, but ominous sounding consequences for the future, I think some other deficits will really whack rural America up side the head: state budgets.

Eleven weeks after Congress settled on a stimulus package that provided $135 billion to limit layoffs in state governments, many states are finding that the funds are not enough and are moving to lay off thousands of public employees.
The state of Washington settled on a budget two weeks ago that will mean 1,000 layoffs at public colleges and several times that many in elementary and high schools.
The governor of Massachusetts, who cut 1,000 positions late last year, just announced 250 layoffs, with more likely to come soon.
Arizona has already laid off 800 social service workers this year and is facing the likelihood of deeper cuts over the next two. The state no longer investigates all complaints of child or elder abuse. [More]

Unable to fund deficits by creating money, states have postponed the inevitable for so long the effort to struggle back to balance will involve truly draconian cuts. More importantly, my guess is these cuts will be the cruelest of all in farm country.

First, schools will be hit very hard. many of my friends are married to teachers, and teaching jobs are some of the more desirable and stable in rural areas. Even more pronounced is the effect university jobs have on surrounding rural areas.  Not only are the salaries and security of that employment perhaps the best, the benefits make self-employment possible for otherwise uninsurable families.

As smaller schools struggle and even fail, consolidation will become the only option with all the costs and benefits for farm families that accompany it. I could see rural population decreasing as well, as manufacturing jobs, and social support systems shrivel for rural populations.  Even if rural schools strive to stay open, less state money will mean more local taxes, which means real estate taxes.

State budget crises presages miserable rural roads even as we ramp up our road-damaging farm machinery and grain volumes to be transported increase.
Governor Mark Parkinson has cut millions in state funding to bring the current budget into balance. Kansas’ schools, roads and many of the state’s most vulnerable citizens are again impacted by a historic drop in state revenue.
“Unfortunately, we are now to the point of potentially making crippling cuts to state services. This latest round of budget reductions will mean that class sizes will again increase in Kansas schools. Some districts will be forced to lay off teachers and close schools. These cuts mean that our universities will have fewer professors, offer fewer classes and critical investments in our future are in jeopardy. These budget cuts will force us to reduce supervision of released prisoners, increase the number of disabled citizens waiting for services and reduce road maintenance across the state,” Parkinson said. [More]

Linked to university budgets, I suspect Extension will be decimated, especially in states like mine - IL. Many of those jobs are part of a farm family economy, as well.
Rep. Richard Stevenson, R-PA 8th, asked what stresses the agricultural community was under because of the funding situation. Spanier indicated that Penn State cannot continue to meet expectations with no increase in state support for agriculture, as is proposed by Gov. Rendell.
"If there is no increase in funding there is no way to support Cooperative Extension or agricultural research at the current level," Spanier said. "We will have to have a reduction of another 54 positions in extension service. We cannot continue all of these services." [More]
Even courthouses could close.

The point is not so much the awful changes being forced upon us, but I hope a realization of why federal governments should run deficits during recessions.  (I strongly objected to the deficits during the expansion years) State budgets are procyclical and add fuel to the downward spiral because as revenues fall, they must reduce spending which then causes a drop in state economic activity which lowers tax revenue.

I can appreciate the outrage over projected federal deficits.  However, as reality hits Route 2, suddenly stimulus efforts during recessions may look less objectionable.

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