And yet, all signs in her state—and many others—point toward a long-term struggle, at best, as they continue to beat back the effects of the recession.
Last month, bank analyst Meredith Whitneyoffered an ominous prediction for the states: "The similarities between the states and the banks are extreme,” she said, suggesting that some are poised for failure of the same proportions as U.S. banks in 2008.
Whitney went on to say that, like the banks, the states have been “spending dramatically and are leveraged dramatically,” noting that municipal debt has doubled since 2000 and spending has long outgrown revenues.
According to economist Nouriel Roubini, municipal debt is currently 20 percent of GDP. He added that unfunded liabilities of state and local public employee pension funds are as high as $3 trillion—or another 20 percent of GDP.
“The issue is whether the federal government will bail out state and local governments with a federal guarantee of their debt similar to that received by Greece,” he said, “And to be generalized to other Eurozone members in trouble via the new European stabilization fund.”
Jim Rogers,the well-known investor and financial commentator, said state failure is an issue that is more important than China's currency manipulation and the midterm elections— although the vote will effect how states move forward into the next fiscal year.
Rogers has been warning of state financial failure for months. However, there are “other, more important things to be preparing yourself for,” said Rogers, including, “the currency turmoil, more inflation, the popping of the bond bubble."
The economic record for the individual states is less encouraging, and all over the map. State tax revenues were 11.5 percent lower in the 2010 fiscal year than 2008, while the need for state-funded services did not decline, and in many places increased.
The unemployment rate in California, the world’s eighth largest economy, stands at 12.4 percent, higher than the national average of 9.6 percent. Major U.S. cities, including Los Angeles and Seattle, are on the brink of financial ruin and threatening to drag their state economies down with them with crippling debt and job cuts.