The cutback in consumer spending is seriously impacting state budgets. Here are a few recent headlines.

New York: Sales-tax revenue in counties, state continues steep drop

October 9, 2009

ALBANY — Sales-tax collections for counties and the state dropped 8.3 percent in the third quarter, a troubling sign for governments already struggling with higher costs and declining revenue.

The figures from July through September continue a precipitous drop in sales-tax revenue for governments and an indication that the economy is still struggling. It’s the fourth consecutive quarter of sales-tax declines for the state.

What’s also troubling, government officials said, is that they hoped the third quarter would have marked improvement, particularly because of the popularity of the federal Cash for Clunkers program and back-to-school retail sales.

The third-quarter drop, though, was pronounced in some counties compared to the same period last year. The lower sales-tax revenue has been a major factor in the state’s $3 billion mid-year budget gap, which Gov. David Paterson is trying to close with the Legislature.

Georgia: State Tax Collections Drop Sharply

October 9, 2009

ATLANTA (AP) Georgia tax collections dropped by about 16 percent in September over the same month last year, continuing a trend set in the first two months of the fiscal year, Gov. Sonny Perdue announced Thursday.

Net revenue collections for September were about $1.3 billion, compared to about $1.6 billion in September 2008. Three months into fiscal year 2010, revenues are down about 14 percent compared to the first three months of last fiscal year.

“There’s still some weakness in the economy, which results in lower tax collections, both in sales tax and income tax, and that’s really affecting us,” said Perdue spokesman Bert Brantley.

But Brantley acknowledged that September’s revenue drop, which was as steep as the month before, can’t be explained away by lingering refund checks from the last fiscal year.

“There’s not as clear of a reason why” for the drop in September, he said.

The clear reason why is people are unemployed and broke.

Texas: State sales tax collections down for 8th month in a row

October 10, 2009

State sales tax collections fell 12.5 percent last month, the eighth drop in a row.

Comptroller Susan Combs said Friday that the trend is likely to continue through the end of the year.

At some point sales tax revenue will stop falling. However, the rebound that that states are expecting will not materialize.

Iowa: Tax collections forecast to drop 7.1 percent; steep budget cuts expected

October 7, 2009

Tax collections will run about 7.1 percent lower than predicted last spring, new projections show, which means steep cuts to state spending are in Iowa’s near future.

A three-member panel of experts called the Revenue Estimating Conference predicts state revenue this budget year will be $5.438 billion.

That’s $414.9 million less than predicted in March.

“It’s dire. It’s severe. It’s probably the worst I’ve seen,” said REC member Holly Lyons. The recession has shrunk state revenues across the country.

Today’s news is that plunging tax revenues have knocked the state budget severely out of balance, just three months into the budget year.

It may be “dire” and “severe” but it’s going to get more dire and more severe.

Wisconsin: Sales tax collections for Miller Park drop significantly.

Sales-tax collections for the Miller Park stadium [Milwaukee Brewer’s Baseball] district plummeted 29% in August compared with the same period last year and are now running 10.4% behind a year ago.

Since 1996, the 0.1% Miller Park stadium tax has been a steady performer, generating millions of dollars to pay off the construction and financing of the Milwaukee Brewers’ ballpark. The tax is collected from vendors in Milwaukee, Racine, Waukesha, Washington and Ozaukee counties, sent to the state Department of Revenue for processing, and then distributed to the stadium district.

But the Great Recession has had a dramatic impact; only $1.96 million was distributed to the district in August, far below what had been forecast.

People have finally had enough of overpriced hot-dogs, snacks, and beer at baseball parks. Sounds like a good thing to me.

California: California Budget Is Already in the Red 10 Weeks After Passage.

October 10, 2009

California Governor Arnold Schwarzenegger will know within a month whether a $1.1 billion drop in revenue collections is part of a growing budget shortfall or an isolated event, his budget spokesman said.

Revenue in the three months ended Sept. 30 was 5.3 percent less than assumed in the $85 billion annual budget, state controller John Chiang reported yesterday. Income tax receipts led the gap, as unemployment reached 12.2 percent in August.

“The culprit here appears to be estimated quarterly personal income tax statements,” H.D. Palmer, the governor’s budget spokesman, said yesterday. “The numbers are cause for concern, but the issue now for us is to determine if this is a one-time event or whether it has more long-term implications.”

The latest figures show that California is facing resurgent fiscal strains brought on by the U.S. recession. Since February, Schwarzenegger and lawmakers have cut $32 billion from spending, raised taxes by $12.5 billion and covered $6 billion more with accounting gimmicks and borrowing. Even with those actions, state budget officials predict an additional $38 billion in deficits in the next three fiscal years combined, including $7.4 billion in the year starting July 1.

The odds this is a “one time event” are approximately zero.

Kentucky: State revenues plunge in first quarter

October 9, 2009

Receipts to the state General Fund dropped 9.8 percent in September, compared to September 2008, the Office of State Budget Director reported Friday.

“There’s some reason for hope that we’ll see it balance out later this fiscal year, but it’s a dim prospect for the next budget cycle,” said Rep. Rick Rand, the Bedford Democrat who is chairman of the House budget committee.

Sen. Bob Leeper, an independent from Paducah who is Rand’s counterpart in the Senate, said “the outlook is grim. But we’ve been preparing for it and preparing our constituents for a difficult time ahead.”

If revenue doesn’t meet expectations, spending must be cut or other adjustments will have to be made.

“Tax collections have been weak in the major sources of revenue that support the operations of government,” State Budget Director Mary Lassiter said in the report. “Sales and use taxes and income taxes comprise nearly 75 percent of our General Fund tax revenues and have been declining for an extended period of time.”

Reason for hope? Pray tell what reason for hope is there?

Indiana: Continuing plunge in revenue alarms Governor Daniels.

October 9, 2009

Indiana’s state tax collections are continuing to take a dive, prompting Gov. Mitch Daniels to warn Thursday that budget cuts that could include schools and employee layoffs might be needed soon.

Revenue for September was $166 million short of a May forecast that lawmakers and Daniels used to put together a new two-year budget that took effect July 1. Tax collections are down by $254 million for the first three months of this fiscal year — 8 percent less than forecast and 14 percent less than the state took in for the same period a year ago.

“Today is not a day to remove any option except we are not going to raise taxes on people who are strapped as it is,” he said. “The job of keeping Indiana above water and solvent while other states are not are not getting any easier.”

“It is now very clear that the methods that have been used here, and in other states for that matter, are simply out of date,” Daniels said.

“My suspicion is a big part of the difference is that Americans, including Hoosiers, have shifted in their consumption patterns. They are saving more and spending less, and I believe that isn’t a very temporary phenomenon. I think that is going to continue.”

Ding Ding Ding We Have A Winner

Give Daniels a cigar for multiple consecutive thoughts that make sense, an extreme rarity in politics at any level.

1) It is now very clear that the methods that have been used here, and in other states for that matter, are simply out of date.

2) Americans, including Hoosiers, have shifted in their consumption patterns. They are saving more and spending less.

3) This isn’t a very temporary phenomenon.

Mike “Mish” Shedlock
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