LinkedinDiggFacebookMixxMySpaceYahoo! BuzzPermalinkBy KIRK JOHNSON
Published: June 4, 2009
DENVER — The carnage in state budgets is getting worse, a report said Thursday, with places like Arizona being hurt by falling revenue on multiple fronts, like personal income and sales taxes. Other states are having mixed experiences, with some tax categories stable, or even rising, even as others fall off the map.
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The report, by the National Conference of State Legislatures, also provided a scorecard for how well drafters of state budgets read the recession’s economic tea-leaves — and the short answer is, not very well.
Thirty-one states said estimates about personal income taxes had been overly optimistic, and 25 said that all three major tax categories — sales taxes, personal income taxes and corporate taxes — were not keeping up with projections.
Even gloomy-Gus states that saw the recession coming and low-balled their tax estimates had little room for celebration, the report said. “The handful of states that have weathered the economic decline reasonably well are starting to report adverse revenue developments,” it said. “The news is alarming.”
Three states, for example — Alabama, Colorado and North Dakota — said personal income taxes were coming in higher than expected. But they said they had seen declines in other tax categories, like corporate taxes (down 33 percent in North Dakota), severance taxes from oil and gas (down 51.8 percent in Colorado) or sales tax (down 8.5 percent in Alabama.)
Hardest hit on the income tax collection front was New York, where revenues were off 48.9 percent compared with the last fiscal year. Corporate income taxes plummeted most in Oregon, down 44 percent, while sales taxes fell most in Washington, down 14.1 percent.
There were some winners, at least by comparison. Sales taxes were running ahead of last year in nine states, led by North Dakota, where they were up 18 percent. North Dakota was also the strongest among the three states — Alabama and Kansas are the others — that saw year-over-year increases in personal income tax collections.
Arizona was among 29 states that suffered revenue losses in every major tax category.
“What this report really underscores is that the states are facing revenue-based problems,” said Todd Haggerty, a research analyst at the conference, a nonpartisan group based in Denver. “If there’s been an increased demand for state services — as there has in many states — it’s putting them into a really tough situation.”
A report issued by the group in April said that spending increases related to the recession, from more people seeking state services, were compounding the impact of a decline in tax revenue. Sixteen states were facing higher-than-anticipated costs for health care, seven were spending more on public safety and four were seeing cost overruns on programs for the poor like food stamps.
Worse is yet to come. The total collective budget gap that the states will have to resolve in the fiscal year that starts, in most states, next month, is $121 billion, compared with 102.4 billion for the year approaching its end, the report said. Measures on the table to fill those holes, or already in place, range from the macro (a cut of 25 percent in grants to local governments in Minnesota) to the micro (elimination of staffing at metal detectors in local courthouses in Maine).
Two of the gloomiest state capitals next year, the group said, might be found in Alaska and Nevada, with each state anticipating a gap of more 30 percent between what it hopes to collect and what will need to spend.
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