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Uneasy economy: Energy, farm prices protect West, MidwestDES MOINES, Iowa (AP)--Rising energy costs have been cited as one factor pushing the nation toward recession, but those same increases are keeping some state economies strong. Central states and those in the West with large stakes in oil, gas, minerals and corn--the main ingredient in ethanol--have avoided the economic downturn that threatens tax revenues elsewhere. Montana and New Mexico expect oil revenue to remain strong and Wyoming, the nation's leading coal-producing state, projects its energy production revenue will increase a savings fund to $4 billion by 2010. In Alaska, oil and gas revenue could produce a $5 billion surplus over two years. Ernest Goss, a professor of economics at Creighton University in Nebraska, said there's no doubt that some states with energy reserves will maintain robust economies. "Not only are they weathering the recession, it just isn't hitting them," Goss said. Many Midwestern states expect to ride out the economic slump without severely cutting spending. South Dakota, Nebraska, Kansas and Iowa are insulated somewhat from serious impact because farmers are on a spending spree, Goss said. They expect the ethanol boom, which has driven corn and soybean prices to record highs, is here to stay. "Auto and truck dealerships are selling trucks to farmers like crazy," Goss said. Additionally, Midwestern states hadn't come to depend on new home construction and rising real estate prices as sources of tax revenue. The declines in the housing sector are adding to the financial problems in many states. "This part of the country is weathering the recession much better and the reasons are the very good farm income, alternative energy production and finally the housing downturn has had not nearly the impact here." Similar trends are shielding some states in the South, including Mississippi, North Carolina and West Virginia, where state budgets are expected to have surpluses or at the least remain flat. States such as Washington and Oregon are benefiting from their ports, where products like high technology goods, transportation equipment and parts for other products continue to move to emerging markets in China and India, said Tom Fullerton, an economics professor at the University of Texas at El Paso. A weak dollar also could help drive demand for U.S. products. Although about half the states are reporting they will run a surplus or will balance the next year's budget with little pain, Fullerton and others cautioned them against being too optimistic. Fullerton recommended that states with large reserves consider spending more to repair roads and bridges, a move that would improve the infrastructure and boost the regional economy. "For those states who have taken the time to build up contingency funds, 2008 is probably a good year to take advantage of those funds and spend them down," he said. The economic news is not unwaveringly optimistic in the central United States. Michael A. Lipsman, an economic analyst for the state of Iowa, said a deep recession would hurt even a strong state economy. "If things really go south, there's no way we can escape it," he said. A February survey from supply managers and business leaders in nine Midwest and Plains states showed the lowest confidence in the economy since 2000, just before the last recession began. The survey, led by Goss at Creighton, said business leaders are seeing higher costs for raw materials and supplies and anticipate job losses through the middle of 2008. 3/24/08 Advertisement
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