The truth is that while the Fed may have postponed the day of reckoning for another half-administration, the situation at the state level is starting to become untenable.
A report released by the National Association of State Budget Officers confirms all fears about just how gruesome the fiscal catastrophe is at the state level...I dare anyone to tell any state comptroller the joke about the green shoot and the economic rebound: in light of the utter collapse in state budgets, I don't think they will appreciate it too much.
Some of the report's observations:
The number of states experiencing revenue shortfalls increased in fiscal 2009. Revenues from all sources which include sales, personal income, corporate income and all other taxes and fees exceed expectations in two states, are on target in ten states, and are below expectations in thirty eight states. This is in contrast to fiscal 2008 when twenty-five states reported that revenue collections exceeded estimates.Someone may want to FedEx that last statement over to Tim Geithner: it seems even the Chinese students who were cackling dispassionately at TurboTaxTim's cluelessness, are aware of the simple fact that "the poor fiscal situation may continue through fiscal 2011."
Fiscal 2009 estimated tax collections of sales, personal income, and corporate income are 6.1 percent lower than actual fiscal 2008 collections. Specifically, sales tax collections are 3.2 percent lower and personal income tax collections are 6.6 percent lower.
Thirty-five states assume negative budget growth for fiscal 2010 governors’ recommended general fund budgets, while 30 states are estimating negative growth budgets for fiscal 2009.
Corporate income tax collections are 15.2 percent lower for current fiscal 2009 estimates relative to actual fiscal 2008 collections.
Compared to fiscal 2009 collections, recommended fiscal 2010 budgets reflect a 3.0 percent increase in sales tax revenue, 1.3 percent increase in personal income tax revenue, and a 1.7 percent decrease in corporate income tax revenue.
Many states have since reported that April tax collections were well below estimates.
Because states recognize that an economic downturn may last for more than one year they are reluctant to deplete balances. This is in part due to concerns that the poor fiscal situation may continue through fiscal 2011.
Hat tip Richard Sphere: Related Content Print this post