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Higher gas prices and more fuel-efficient cars mean Americans are buying less fuel, thereby reducing gas tax revenue. Volcker acknowledged that despite these challenges, most states can still borrow by issuing bonds at low interest rates. That's mostly because many states have constitutional requirements that they pay bondholders before they pay other bills. The report recommends that states do more long-range budget planning. They should also be more transparent about pension promises made to state and local employees. That would make it easier for voters to understand what those promises entail. And they should build up bigger "rainy day" funds when the economy is healthy to limit the need for cuts and tax increases in recessions. But the task force's primary goal is to raise pressure on policymakers to shore up states' finances. "It isn't going to get the attention it deserves until there are serious expressions of public unhappiness," Ravitch said in an interview. Resolving the problem is mostly a matter of political will, he said. Ravitch has had a long career dealing with state and local finances in New York. He helped revive New York City's subway system as chairman of the Metropolitan Transportation Authority in the early 1980s. That involved delicate negotiations between transit unions and state lawmakers. But now, in most states, the two parties are sharply divided on how to solve their long-term fiscal challenges, he said. Republicans are largely focused on cutting pensions; Democrats are mostly concerned with raising tax revenues. "There isn't any negotiation going on," Ravitch said. "To the best of my knowledge, no one is communicating with each other." Ravitch said he met with Fed Chairman Ben Bernanke and Treasury Secretary Timothy Geithner last week to brief them on the report's findings. The task force plans follow-up reports that look at each of the six states it studied. It will also issue reports on the specific budget challenges the states face.
[Associated
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