Tuesday, June 14, 2011

One nation, in the red...

An AP report today shows that nearly every state in the U.S. is still suffering from a shortfall in tax revenue due to the Great Recession, exacerbated now by the end of federal stimulus money.

The story goes on to cite the following:

• Twelve states started the year with deficits that were equal to 15 percent or more of their general fund, the budget that covers day-to-day operations.

• States with the highest per capita number of Medicaid recipients were among those with the largest budget deficits, as a percentage of general fund revenue.

• Twenty states enjoy general fund budgets that exceed their 2007 levels, while the remaining 30 states are still running behind.

• Tax revenue in Arizona, hit hard by the housing collapse, remains 19 percent below 2007 levels, the largest difference among the states. Next are California and Florida at 18 percent, and Michigan and Tennessee at 17 percent.

• The 50 states have a combined $689.5 billion in unfunded pension liabilities and $418 billion in retiree health care obligations. Five states have unfunded public employee pension liabilities of $50 billion or more.

Of those who have tried to cut or tax their way out of the hole:

In some cases, states have taken steps that actually made their fiscal situation worse.

In Louisiana, for example, the drop in the state's general fund can be tied in part to hefty income tax breaks passed by lawmakers in 2007 and 2008 for middle- and upper-income earners. The permanent tax cuts drained an estimated $580 million the state would otherwise have received this year and similar amounts in future years.

Most states have resisted the temptation to raise taxes during the recession, but there are exceptions.

Then-Gov. Arnold Schwarzenegger agreed to temporary increases in California's personal income, sales and vehicle taxes in 2009. Gov. Jerry Brown, elected last fall, wants to renew those increases for up to five years to bring in more than $9 billion annually.

Since the recession began, New York's general fund has shot up $3.5 billion, or 7 percent, largely because of some of the biggest tax and spending increases in state history, including a $4 billion income tax hike on wealthier residents.

In Illinois, state revenue is 20 percent higher than in 2007 after income taxes were raised. The $6.8 billion that the increase is expected to generate will allow Illinois to avoid some cuts and spend money on neglected programs, particularly the state's underfunded pension funds.

Read the full story here.

To read this blog post in Spanish, go here.