With its fiscal year beginning in April, New York is the first state to pass its budget, serving as a early indication of how stimulus funds are being employed.
About $144 billion of the total stimulus was to be used by states to plug shortfalls and defray the need for tax increases. New York took the most it could get: $7.2 billion and according to David Schaffer of the Rockefeller Institute writing at Stateline.org, the state will raise taxes by $7 billion, “while sticking with spending patterns that could pose enormous fiscal problems when the stimulus runs out.”
With its fortunes closely tied to the financial sector, how New York fares in the coming months, Schaeffer notes, provides a bellwether for stimulus effectiveness, not only for how the state manages its fiscal house, but for the federal bet that pump-priming is the antidote to recession.
The scenario suggested by the Rockefeller Institute is not positive. Some states will still be running huge deficits and openly discussing the need for a second federal bailout.