Daily News

They have cut budgets, frozen hiring and put projects on hold

Published: October 10, 2008

States are cutting budgets, eliminating jobs, putting major construction projects on hold and nervously waiting to see whether their shriveled pension funds recover amid economic turmoil.

They are also considering lawsuits against Wall Street firms. And at least one state — California — may ask Washington to come to the rescue.

California's Gov. Arnold Schwarzenegger said he may have to beg the federal government for a short-term loan to cover operating costs for schools, nursing homes and police if California, the nation's most populous state, is unable to borrow a short-term $7 billion on the credit market.

Many states are expecting big drop-offs in revenue and dispiriting pension-fund losses, and they are making another round of emergency spending cuts on top of deep cutbacks earlier in the year when the economy began softening and the mortgage crisis started to unfold.

"I think everybody agrees: The iceberg is in sight," said Murray Levy, a Maryland state legislator.

New York, the capital of the nation's financial industry, is grappling with the highest unemployment rate since the terrorist attacks of Sept. 11, 2001, and a $1.2 billion deficit that could balloon to $2 billion by March 31, the end of the fiscal year.

"We're going to have to take drastic action," Gov. David Paterson said.

In Massachusetts, Gov. Deval Patrick may ask state legislators for the power to make midyear cuts to close a $223 million budget gap. Massachusetts also saw its pension fund shrink — in September alone — by nearly $4 billion to about $46 billion. (more…)

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