States' Revenue Picture Mixed So Far This Year, NCSL Says

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While revenue projections are being met or exceeded in many states, collections in other states are not keeping up with what policymakers and finance officials expected when they crafted their budgets for fiscal 2008, according to a report released today by the Denver-based National Conference of State Legislatures.

Three Midwestern states—Iowa, Kansas and Nebraska—have raised their revenue forecast for this fiscal year, as have Idaho, New Mexico, Texas, Utah, Washington, and Wyoming in the West. Alaska is expected to do the same. But some of the largest states in the country—California, Florida, and New York—are among the 11 that are revising their estimates to show lower-than-expected revenues.

“Although early warning signs do not portend immediate bad news, concerns for current year budgets are mounting with even greater concern for some states in FY 2009,” the Dec. 10 report says, adding that if the national economy “takes a turn for the worse, state finances undoubtedly will decline from the situation reported here.”

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The report is based on information collected from legislative fiscal directors in November and reflects information from the first quarter of the fiscal year.

The report also confirms data released last week by the National Governors Association and the National Association of State Budget Officers, which showed a continued slowdown in revenue collections in the states. In addition, 15 states had reported deficits or shortfalls in revenue for the current fiscal year. ("Analysts See Continued State Fiscal Slowdown," Dec. 5, 2007.)

The fiscal outlook, the report says, will determine how much flexibility states have in the areas that account for roughly half of their general funds—health care and K-12 education.

Slowdown in revenue growth also comes at a time when several states are expected to tackle such education finance issues as equity and adequacy, and the condition of school facilities.

And a few states are already spending more on education this fiscal year than expected. Both Connecticut and Kansas reported higher-than-projected costs for special education. Minnesota also reported “unbudgeted increases” in education costs.

In the area of tax collection, the report found that personal income taxes were the strongest category, with 19 states reporting collections that exceeded expectations in the year’s first fiscal quarter. Conversely, sales taxes were weak—at least 19 states reported lower-than-projected collections in that same period.

The report also found that problems in the housing market nationwide hurt revenues in about half of the states. At least 13 said that sales taxes were down because of the housing sector’s woes, and at least a dozen saw real estate transfer or recording taxes drop.

Vol. 27

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