June 02, 2008
At each turn, the news that tax revenues fall during recessions is greeted first with surprise, and then with indignation. This is perhaps why no one has expected the states to anticipate this bewildering state of affairs by building up their reserves to levels adequate to weather the really rather moderate financial storms that beset them during lean times.
Too, these articles rarely see fit to mention the other ways in which these wounds have been self-inflicted--the habit of making ever more lavish pension promises to the public sector unions, for example. Public pension funds are now officially a disaster. Politicians promised benefits without funding them. The befuddled fund managers seem to have mistaken beta for alpha, pouring their assets into riskier asset classes because they couldn't make up the deficit on a safe, modest appreciation every year. If these were private companies, most of those managers and their bosses would be under indictment.