Senior Vice President for State Fiscal Policy
The Rockefeller Institute of Government issued a report today that says state revenues are in a “gradual recovery” after their record decline of recent years. The new data that Rockefeller has collected for the report (on revenues for the April-June quarter) are helpful. But it’s too early to say that state finances have turned the corner.
To understand why, here’s a little background. States get most of their revenue from taxes on income, sales, business profits, and related sources. Those revenues are way down because the recession has taken a huge bite out of economic activity in most states. Revenue shortfalls have already caused most states to cut education, health care, services for seniors and people with disabilities, and other areas. States and local governments have also cut over 400,000 jobs, and more job cuts are on the way.
The most recent Census Bureau report on state revenues relied on estimates rather than actual revenue reports for a few states, so the Rockefeller Institute contacted those states directly to get the latest figures for its new report. We’ve revised our revenue calculations using the new Rockefeller figures and found that, in fact, revenues were a bit higher in state fiscal year 2010 (the period ending in June 2010) than 2009.
But that is far from what you could call a recovery. Here’s why:
In short, the worst is far from over. States are going to need to put everything on the table when they write next year’s budgets — and that should probably include changing state tax codes in order to replace some of the recession-induced revenue loss.