The Fiscal Link
Your On-Line Connection to the Latest Fiscal Information in the States: August 2009
NCSL and Fiscal Affairs Updates
2009 will mark one of the most difficult years in history for state budgets based on the latest State Budget Update report from NCSL. The fiscal challenges are enormous, widespread and, unfortunately, far from over. Lawmakers in virtually every state scrambled to keep their fiscal year (FY) 2009 budgets balanced while at the same time struggling to enact new ones for FY 2010.
The economic recession has created serious revenue shortfalls and prompted numerous state legislatures to increase taxes and fees to shore up budgets during 2009 legislative sessions according to the newly released State Tax Update: July 2009 report from NCSL. The actions taken by 36 reporting states to date have resulted in a net tax increase of $24 billion that will help offset $142 billion in budget gaps for fiscal year 2010. The tax increases represent 3 percent of total state tax collections. Sixteen states have increased taxes by more than 1 percent. Nineteen states made no significant tax policy changes.
New officers of the National Association of Legislative Fiscal Offices (NALFO) began their terms at NCSL's 2009 Legislative Summit in Philadelphia. The 2009 Legislative Staff Achievement Awards were also presented at the Legislative Summit. The NALFO recipients were David Abbey, Director, New Mexico Legislative Finance Committee and Sharon Reynolds Ferland, Deputy House Fiscal Advisor, Rhode Island.
How much are state, local and federal taxes compared to the size of the economy? How have tax collections responded during the last two recessions? How has the importance of each tax category changed for states since 1970? Six new briefs from NCSL break down state tax systems by the numbers to answer these and other questions.
Eight states began FY 2010 without finalized budgets. For details, and context on late budgets in the last 10 years (including causes, state responses and costs), see this updated NCSL brief.
State News and Reports
California-- A recent report from the Legislative Analyst's Office reviews the adult probation system in California and presents recommendations for improvements. The county probation departments in California currently supervise roughly 350,000 adult offenders in their community. One recommendation to the Legislature is that it create a new program that would provide financial incentives for county probation departments to reduce their revocations to state prison, since it costs the state on average approximately $49,000 to incarcerate an offender who has had their probation term revoked and been sentenced to state prison.
Illinois-- The Commission on Government Forecasting & Accountability has released a new report, State Tax Incentives for Illinois Businesses, that provides an analysis of the state’s business tax incentives and how Illinois’ business climate compares to other states.
Massachusetts-- The Department of Revenue has issued a report on the Massachusetts film industry tax incentives that estimates the net economic and fiscal impacts of the tax incentive program, using a dynamic model of the state economy developed by Regional Economic Models, Incorporated (“REMI”).
Federal News
The Federal Reserve Bank of Philadelphia has released the latest monthly coincident indexes for each of the 50 states. The latest finding shows that in the past month, the indexes increased in three states (Mississippi, North Dakota, and Vermont), decreased in 46, and remained unchanged in one (North Carolina) for a one-month diffusion index of -86. Over the past three months the indexes increased in two states (Mississippi and North Dakota), decreased in 47, and remained unchanged in one (Montana) for a three-month diffusion index of -90. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index fell by 0.3 percent in June and by 1.0 percent over the past three months.
The National Institute of Corrections recently hosteda satellite broadcast that provided an overview of how legislatures and corrections agencies are dealing with increasing offender populations and decreasing budgets. The special broadcast, Finding Opportunities in Turbulent Times, is split into four sections dealing with factors contributing to the decreasing budget and increasing population, as well as strategies and actions that states are taking to manage the current situation as well as prepare for the future.
The U.S. House of Representatives Committee on Transportation and Infrastructure recently presented its blueprint for the new Surface Transportation Authorization Act of 2009. The blueprint provides highlights for each of the major transportation programs covered under the reauthorization act being considered by Congress this year.
Other Items of Interest
A new report from the PewCenter on the States estimates that states will spend $2.73 trillion on pensions, health care and other retirement benefits for their retired workforce over the next 30 years. The report, Promises with a Price, provides data about the long-term costs of public sector benefits. The report also highlights which states are prepared to pay the significant bill coming due, which are not, and why it matters to state lawmakers and citizens alike.
A new report from the Public Policy Institute of California reviews the state's enterprise zone program that provides employers with tax breaks and other economic incentives when establishing new facilities in areas of high unemployment. A major finding of the study is that in the 42 zones that have been established by local governments across the state, no statistically significant effect on employment has occurred even though $333 million in tax breaks have been granted annually through the program.
The latest State Revenue Report from the Rockefeller Institute of Government reveals that during the first quarter of 2009, state tax collections dropped 11.7 percent, representing the sharpest decline in the 46 years that quarterly revenue data is available. The report also shows that personal income tax collections dropped 17.5 percent during the same quarter. Reflecting the severe revenue problems states have recently reported, the report's preliminary analysis of state receipts in April and May indicates an overall decline of nearly 20 percent. References
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Last updated: August 8, 2009.
Page maintained by Arturo Perez and the Fiscal Affairs Program, NCSL, Denver, Colorado.
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