Here is our latest installment of the Daily Austerity Watch, 24/7 Wall St.’s summary of the major news off efforts by governments to bring their fiscal houses in order.
Portugal: Leave it to the credit rating agencies to state the obvious. Moody’s said today that its rating for Portugal will depend heavily on the country’s commitment to austerity. One problem: Prime Minister Jose Socrates resigned this week after failing to get backing for new austerity measures from Parliament. New elections are coming and investors are nervous. Fitch slashed its rating on Portugal to A-, on par with Moody’s. Standard & Poor’s, though, is taking an aggressive stance, cutting its rating to BBB, two notches below its rivals. It warned of further downgrades.
New York City: Ever since the financial crisis of the 1970s, officials in New York City have had to have their pension benefits approved by the State Legislature. Mayor Michael Bloomberg argues, rightly so, that the arrangement is nuts and wants to have the authority restored to the city. As the New York Times explains in an editorial, polticians in Albany have curried favor with politically powerful unions for years by sweetening their pension benefits. The paper argues that reform is urgently needed.
Unless New York City gets relief, the spiraling pension burden will cripple the city’s finances for years to come. The city’s contributions to the pension fund — for 293,000 employees and about 235,000 retirees — have risen from $1.5 billion in 2001 to an estimated $8.4 billion next year. Payouts to retirees have nearly doubled from $6.6 billion in 2002 to more than $11 billion this year.
Texas : House Democrats are complaining that the impact of a state budget proposal that passed the House Appropriations Committee would be devastating on the state. The two-year spending plan would slash spending by $22.9 billion, eliminate more than 8,000 jobs and force deep cuts in education, health care and a host of other services. According to the Legislative Budget Board, the impact of the spending plan would be far-reaching, resulting in the loss of as many as 335,244 jobs by 2013. “We can’t grow the Texas economy with a budget that destroys jobs, hurts neighborhood schools, and makes college more expensive,” Rep. Mike Villarreal (D) is quoted by the Fort Worth Star-Telegram as saying.
Republicans dispute this characterization. Republican Governor Rick Perry argues that austerity is needed to foster a pro-business climate in Texas. The House is due to vote on the budget April 1.
Idaho: The state is becoming the latest to slash support for higher education. Members of the Idaho Senate voted yesterday along party lines to strip away $7.6 million in funding for the state’s public universities. “Sen. Elliot Werk, of Boise, was among Democrats who debated against the budget that would bring state support for higher education to its lowest level in more than a decade,” the AP reported. The bill now heads to the House.
Jonathan Berr
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