Fueling an Even Bigger Public Safety Problem

In a press release issued last Thursday, organizations representing state chief executives and fiscal officials had nothing good to say about the outlook for municipal finances:

"NGA, NASBO Say States Will Continue to Face Fiscal Difficulties in Coming Years"
 
Preliminary Findings of Survey Show Fiscal Conditions Continue to Deteriorate

In a preliminary review of the biannual report The Fiscal Survey of States, officials from the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO) today forecasted continued fiscal difficulties for states.

In fiscal 2009, states were forced to reduce General Fund expenditures by 4.8 percent and are expected to reduce fiscal 2010 General Fund expenditures by at least 4.0 percent, marking the first time that state spending has declined in back to back years. The severe national recession drastically reduced tax revenues from every revenue source during fiscal year 2009, and revenue collections are forecasted to continue their decline in fiscal 2010. As state revenue collections historically lag any national economic recovery, state revenues will remain depressed throughout fiscal 2010 and likely into fiscal years 2011 and 2012.

Overall, state revenues declined 7.5 percent in fiscal 2009, which for most states ended June 30, 2009. Revenues will likely continue on this downward trend for another one or two quarters before turning up slowly.

The weakening of state fiscal conditions is reflected in the $250 billion in budget gaps faced by states between fiscal 2009 and fiscal 2011. Of the $250 billion, states closed $72.7 billion in budget gaps during fiscal 2009 and $113.1 billion before the enactment of their fiscal 2010 budgets to bring them into balance with drastically declining revenues.

"These are the worst numbers we’ve ever seen in the decades of putting together this report," said NASBO Executive Director Scott D. Pattison. "States have been forced to lay off and furlough employees, raise taxes, drain rainy day funds and sharply cut state spending in ways that impact every part of state government."

In fact, few services have been spared, including public safety. Just this past week, for example, numerous reports have surfaced detailing proposed or actual cuts in police budgets in places such as Grand Rapids (Michigan), Colorado Springs (Colorado), Tulsa (Oklahoma), San Diego (California), Milwaukee (Wisconsin), and New Orleans (Louisiana), among others.

With illegal activity poised to keep rising as economic conditions remain depressed (despite what Washington keeps telling us) -- especially given that many formerly law-abiding Americans now feel compelled to join the dark side, as I noted in "Hard Times and Bad Behavior" -- that suggests crime could touch the lives of many more Americans than it already does.

But that's not the end of it. According to a report in the Financial Times, "US Jails Set to Empty as States Reduce Deficits," some states could end end up fueling an even bigger public safety problem in their hasty efforts to address large-scale fiscal woes.

Freedom came early this week for 62 inmates of Illinois state prisons.

The former prisoners became the first of 1,000 low-level, non-violent offen-ders in the state to be let out of prison early over the next few months as Illinois battles a budget deficit that could reach $12bn (€8bn, £7.2bn) next year.

The Illinois department of corrections says monitoring the offenders rather than incarcerating them will save $5m a year. In recent months the state has also taken probation and drug-treatment measures aimed at curbing the growth in inmate numbers.

Illinois' early-release scheme is one of a string of measures that states across the US have taken as they face the twin headaches of a bloated prison population and falling tax revenues. All but two states face budget shortfalls for fiscal 2010, according to a report out this week by the Pew Center on the States.

Some 28 states have planned cuts in prison budgets next year: Kansas opted to cut 22 per cent, Nebraska 18 per cent, Illinois 17 per cent and Georgia 15 per cent - although the use of federal stimulus money has softened the blow.

The result is that the US could see the first fall in prison population since the early 1970s, says John Pfaff, a professor at Fordham University in New York who studies prisoner numbers.

States have cut budgets in previous down-cycles - such as in 2001-02 - but the extent of the current measures is larger, as states both try to stem prison admissions and release inmates early.

The measures are being taken in response to a steady growth in states' prison and associated budgets to $52bn last year.

"It costs about $35,000 a year to imprison a person," says Bernard Harcourt, a law professor at the University of Chicago. "We're now beginning to start processing some of the costs associated with some of our penal practices in this country."

More than three-quarters of state spending on prisons goes on staffing costs and a string of states have opted to cut staff and facilities.

Michigan, for example, which has a $2.8bn budget deficit, is closing six prison camps and five prisons, while New York state plans to close three minimumsecurity prison camps and parts of seven more facilities. Kansas, New Jersey, North Carolina and Washington are also closing prisons, while Alaska and Colorado have frozen prison-building plans.

While hard decisions may be unavoidable, many are concerned at the possible effects of the cost cuts.

In Michigan, for example, prison officers are on strike, saying closing facilities has led to such overcrowding that prisons are unsafe for their members and for inmates. In other states, communities have complained that prison closures will take away jobs.

There is also a worry about the consequences of letting more prisoners out during an economic downturn.

"Even if people all had sterling résumés, this is a tough time to get work," says Bill Johnson of the National Association of Police Organizations, the US's biggest union for active-duty officers.

"The fear is that many will return to a life of crime on the streets, and the citizens who live in metropolitan areas will bear the burden in terms of decreased public safety and increased crime," Mr Johnson says.

Michael J. Panzner
Editor, Financialarmageddon.com

Also by Michael J. Panzner

Michael J. Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes, published by Kaplan Publishing.