Declining Tax Revenues Threaten Budgets in West and Midwest

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WASHINGTON--Economic woes in agriculture and the oil industry continued to threaten the education budgets of a number of Western and Midwestern states last year, according to a new report from the U.S. Census Bureau.

Ten states, most of them located in the Great Plains, saw their tax revenues decline by as much as 11 percent in fiscal 1986, the bureau reported.

Collapsing petroleum prices rocked the economies of Texas, Louisiana, Oklahoma, and Alaska, which depend heavily on severance taxes imposed on oil and natural-gas producers. Louisiana's tax income declined by 6 percent, while Texas's revenues were off by slightly more than 4 percent.

Several farm states were hit even harder by the severe recession in agriculture. North Dakota's revenues declined by 11 percent, the most of any state, while Minnesota brought in 6 percent less than in fiscal 1985.

Economic troubles were not limited to the heartland, however. The Census Bureau report found that the average revenue increase for all states last year was only 5.6 percent, the second-lowest figure in two decades and the worst since the 1982-83 recession.

The Outlook for '87

According to Gerald Miller, director of the National Association of State Budget Officers, a preliminary survey shows that 1987 is also shaping up as a bad year for state finances.

In a report published in March, the association predicted that state revenue increases would average a disappointing 4.5 percent this year--a full percentage point less than expected spending. This development will require some states to use up any budget surpluses accumulated in previous years, the survey noted.

But even this stopgap measure has not averted widespread budget-cutting. According to the budget officers' group, 23 states have already been forced to trim the 1987 budgets enacted last year to avoid deficits.

"This year, as in past years, governors attempted to protect the education budget from cuts,'' the report noted. "However, several financially strapped states reported education was a budget priority simply because the governor recommended that its allocation not be cut, rather than earmarking additional dollars for the program.''

Mr. Miller predicted that a number of agricultural states would soon face the need for even further budget cuts as the farm economy continues to worsen. But stabilizing prices, he said, should lead to a modest recovery in the oil states.

"I don't want to say it's going to turn around and be another boom,'' he warned. "If you see another collapse in oil prices, those states are going to be back down the tubes again.''

Vol. 06, Issue 33

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