As the national economic meltdown takes its toll on local economies, some out-of-the-way states are enjoying unprecedented prosperity. Home prices in states like Wyoming, West Virginia and North Dakota continue to rise,wages are growing and unemployment is at record lows.
While at least 23 states and the District of Columbia scramble to cut their spending,these states and others like them are enjoying economic boom times.These geographically and socially disparate states share two key characteristics,experts and officials said.
They are isolated from major urban centers — and thus from the housing bust and loss of financial industry jobs that have hobbled other economies. And they benefit from an abundance of in-demand commodities such as coal, natural gas and grain, whose prices remain at historically high levels despite recent drops sparked by fears of a global recession.“The downturn in the economy has winners and losers,” explained Scott Pattison, executive director of the National Association of State Budget Officers. Pattison explained, “after 9/11, it was fairly uniform — everyone had a downturn.This time it’s very different because of the high agriculture and energy prices,”and because the deflating housing economy is a regional phenomenon.
Wyoming anticipates a $100 million budget surplus this year, and its economy has grown threefold since 2001. North Dakota has rising wages and an unemployment rate that is half the national average. And West Virginia’s top budget official says the state’s economy is better than at any time since it was founded in 1863.
“They may not be wealthy states, but they pretty much all have budget surpluses,” allowing them to consider tax cuts or new spending, said Michael Bird, federal affairs counsel with the National Conference of State Legislatures. Meanwhile, traditionally wealthy states are cutting back in the face of declining tax revenues and higher borrowing costs. Virginia’s governor just ordered the layoffs of 570 state employees, and a Florida agency recently proposed selling the state’s fleet of airplanes. California and Massachusetts have asked the federal government for unprecedented short-term loans
that they normally would be able to secure from private markets.
Mineral wealth does not guarantee economic strength, however. Colorado expects to take in 84 percent more in energy-extraction taxes this year than last,but faces a $99.4 million shortfall due to lower income and sales tax collections. But for many rural states with in-demand natural resources, the economic crisis gripping the rest of the nation has hardly cast a shadow. Virgil Helton, West Virginia’s revenue secretary, said, “We just haven’t been exposed to what the Arizonas and the Californias and the Floridas have.” He said West Virginia has record-low unemployment and is poised to benefit from rising coal tax rates, which will adjust to reflect the current high prices as long-term contracts expire. Income tax collections are up, too, thanks to new and better-paying jobs in the state,
which has long had one of the nation’s poorest populations.
Wenlin Liu, senior economist with Wyoming’s economic analysis division, said his state is especially strong, thanks to a government that derives two-thirds of its revenues from the energy industry. Unlike earlier boom-bust cycles that upended many energy-producing states, Liu said he believes today’s high prices will hold steady “for many years”
because they are based on demand from emerging global markets.
That’s a dangerous assumption, said Nicholas Johnson, director of the State Fiscal Project at the Center on Budget and Policy Priorities, a nonpartisan research group. When prices are high for a commodity a state produces, the growing energy or agriculture sector supports higher real estate values,a strong service sector and wages growth, he said, so officials “just appear to be doing everything right until something happens to those prices.”
And when states depend too heavily on a single sector’s strength, they are setting themselves up for a fall, he said. Indeed, key commodity prices have swung wildly in recent weeks as uncertainty about the fate of the global economy has led some investors to bet that demand for oil, natural gas and other products will slacken. West Virginia’s Helton agreed that states should have contingency plans, saying, “If we just sit back today and say things will be fine, we’re kidding ourselves.” He said the state is always considering what services it would have to cut if coal prices were to drop and unemployment were to climb. Factors like savings in rainy day funds and high bond ratings also can make a difference in how a state economy fares.