A few weeks ago, we had LSE IDEAS' very own Niall Ferguson write about how selling off the good bits of America can be a measure to help raise American revenue. Given that all American states except Vermont have some sort of balanced budget law, recent hard times have been accompanied by Greece-inspired fudges and kludges. Like with all Cheneynomic commentary, the numbers just don't add up for these states. No matter; eventually, the stench of US fiscal decay escapes and the odour ain't pleasant. So, aside from slashing services left, right and centre--taxes are still a bit more difficult to push through with the American electorate--what is this motley collection of states to do? You got it--Fire Sale of the States is well underway:
The Great Government Tag Sale is on. As states and cities struggle with billions of dollars in shortfalls, elected officials are increasingly selling public assets to cover their costs. Sometimes municipalities sell the buildings to pocket a one-time pile of cash and then lease them back so they can continue to use them.There is no alternative? Well, it's pretty close:
To proponents, selling government property is an efficient way to plug budget holes. That's one reason the Obama administration has looked at unloading office towers, courthouses, warehouses and shacks. Private owners who develop the properties can inject vibrancy into municipal dead zones, the thinking goes. Buildings that were once exempt from property taxes are put back on the rolls.
But to critics, these sales are as misguided as pulling money out of your house to pay your bills. They point out that the government is letting go of a long-term, valuable asset in exchange for a one-time payment. When the asset is a building, a municipality then has to spend more money on leasing it back or renting another facility...
Years of wishful budgeting and fiscal gimmickry have finally caught up. The states' "ridiculous" budget and pension accounting would "make Enron blush," as Microsoft founder Bill Gates recently put it. For fiscal 2012, states face a $125 billion shortfall, according to the Center for Budget and Policy Priorities.Also see the informative TIME "Broken States of America" piece detailing this lot's sorry fate. The downside of these one-off sales is precisely that they can be only done once. So the stock of saleable assets will only keep dwindling unless some major turnaround in state finances occurs. Don't count on it, however.
Elected leaders have already raided road-repair budgets and borrowed from emergency-service coffers. They've nabbed citizens' unclaimed checking account cash and sold future proceeds from lotteries. Detroit and Omaha just reduced the pensions of the police. Now that other options have been exhausted, officials say that to avoid mammoth tax hikes — or any tax hikes, in some cases — they have no choice but to sell municipal assets.