The Center on Budget and Policy Priorities released an analysis yesterday forecasting that as least 21 states will face budget shortfalls due to reduction in sales tax collections and other tax revenues in the next fiscal year. This isn't good news, as state budgets are far less flexible than the federal budget and usually are legally prohibited from running a deficit. From the report's introduction: The bursting of the housing bubble has reduced state sales tax revenue collections from sales of furniture, appliances, construction materials, and the like. Weakening consumption of other products has also cut into sales tax revenues. Property tax revenues have also been affected, and local governments will be looking to states to help address the squeeze on local and education budgets. And if the employment situation continues to deteriorate, income tax revenues will weaken and there will be further downward pressure on sales tax revenues as consumers become reluctant or unable to spend. The vast majority of states cannot simply run a deficit or borrow to cover their operating expenditures. As a result, states have three primary actions they can take during a fiscal crisis: they can draw down available reserves, they can cut expenditures, or they can raise taxes. States already have begun drawing down reserves; the remaining reserves are not sufficient to allow states to weather a significant downturn or recession. The other alternatives — spending cuts and tax increases — can further slow a state's economy during a downturn and contribute to the further slowing of the national economy, as well. CBPP: 14 States Face Total Budget Shortfall of at Least $29 Billion in 2009; 12 Others Expect Budget Problems

Well, this just isn't helpful. Congressional Republicans are making noises that they really aren't in a mood to hold hands with Democrats and implement a fiscal stimulus package that would actually, you know, work. The New York Times is reporting a selection of statements by a few Congressional Republicans indicating that the Republican caucus may demand that extension of the Bush 2001-2003 tax cuts be included in any fiscal stimulus package.

Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (D-NV) have sent President Bush a letter requesting to work with him and Republican Congressional leadership to craft an economic stimulus package that adheres to the three Ts of sound fiscal policy: Timely, Targeted, and Temporary.

While we reported in December that Congressional Democrats had caved to President Bush's top-line appropriations number (while still attempting to fund their priorities), some things were certainly underfunded. Case in point is the Argonne National Laboratory in Darien, IL. Darien Suburban Life newspaper reports on the cutback: Argonne Director Robert Rosner said in a memo to staff last week the cuts stem from unexpected reductions in Washington brought about by the Congressional budget appropriations bill passed in December. Argonne's news followed the announcement of similar cuts at Batavia-based Fermilab, which learned in late December it will have to lay off as many as 200 employees due to cuts. Director Rosner went on to say he thought the cutbacks would have a negative effect on morale at the lab, but that they would prevail. I'm not sure how they are going to do more scientific research with fewer people and resources, but perhaps Director Rosner has some tricks up his sleeve. I suspect similar cutbacks will happen at other national labs around the country, slowing the pace of scientific discovery and development of new technologies. Remember that the U.S. government has developed numerous things through scientific and technological research that have been extremely valuable to our society. Space blankets, penicillin, the internet, and velco are only a few examples. It's too bad our elected officials can't prioritize funding for these important investment.