StateStats: Disappearing Revenue: February 2010
State general fund revenues in FY 2009 were decimated by the recession. Nearly every state saw FY 2009 collections recede from past levels. In some cases, the drop has marked the low-point in revenue collections for the decade.
The steep drop in FY 2009 revenues has raised questions of when they will return to their peak levels (which was FY 2008 for 41 states). Some states project a return to peak levels as far out as FY 2014 or FY 2015, but for many, a return is not even on the horizon.
Virtually no revenue source has been immune from the effects of the recession. Revenue performance midway through FY 2010 continues to illustrate just how difficult it has been to forecast in the current economic climate. Ten states have lowered their forecast for all major categories and are still seeing collections fail to meet reduced targets.
Twenty-eight states and Puerto Rico reported that personal income tax collections were below the latest estimate, with 13 states failing to meet a reduced target. (Nine states do not levy a broad-based income tax.)
General sales and use taxes fell below the most recent forecast in 37 states and Puerto Rico. (Five states don’t levy a sales tax.) And corporate taxes were below the latest target in 21 states.
History tells us that, even after the U.S. economy recovers, states are in for hard times. Their recovery tends to lag the national recovery as they wait for state employment and wages to grow, consumers to shop and businesses to post profits. This can be a painfully slow process.