State And Local Government Revenues Rose Last Quarter

Tax revenues of U.S. state and local governments rose in the third quarter, the U.S. Census said on Tuesday, marking the eighth straight quarter of growth and heralding the promise of continued economic recovery in areas where revenues collapsed during the recent recession.

Revenues totaled $292 billion, rising 4.1 percent over the third quarter of 2010 to their highest third quarter level on record.

They were primarily bolstered by a 10.9 percent surge in individual income taxes, which reached $66.7 billion in the third quarter.

"State and local finances are gradually improving, but neither states nor localities are out of the woods yet," said Gregory Daco, principal U.S. Economist at IHS Global Insight, in a note on the data.

"The current fiscal year will be one of many challenges. State and local governments will have to manage still-high demand for public services while relying less on federal assistance, and without the boost to revenues from temporary tax increases and fees," he added.

Most states begin their fiscal year in July.

State tax revenues alone rose 5.6 percent, to $178.2 billion, from the third quarter of 2010.

States had experienced a slight time lag between the recession's beginning in 2007 when the fall in employment, housing prices and consumption hit the wider economy and state revenue collection.

Despite the onset of the recession, their revenues reached a record high in 2008 before the recession's impact was felt and revenues plummeted.

I n much the same way, states are only now beginning to register the recession's end, officially in June 2009, and are eager for revenues to return to the 2008 peaks.

And while revenues have been improving steadily, the European debt crisis, stock market declines, and other economic troubles on the national level have states worried revenue growth will not last.

In Tennessee, individual income tax receipts plummeted 42.2 percent in the third quarter from the same period in 2010, the only state where those tax revenues dropped, Census data showed. On the other hand, they rose 139.6 percent in Hawaii and 81.8 percent in Illinois.

All property taxes increased a much smaller 1 percent to $87.4 billion in the quarter. Those collected by local governments, $84.4 billion, were up 1.5 percent from the same quarter a year before.

Sales tax revenues made much heartier gains, rising 3.3 percent to $73.3 billion, but corporate income taxes dropped for the first time in a year, by 2.9 percent to $9.1 billion.

Sales tax collections dropped in six states and the District of Columbia. They rose the most, 40.8 percent, in North Dakota, and were up 25.1 percent in Nevada. Five states do not collect sales taxes.

The Census data showed that other taxes, primarily those charged on oil and mineral extractions, surged 75.5 percent to $3.7 billion. Only a handful of states levy severance taxes, such as oil-rich Alaska, where they leapt more than 200 percent.

At the start of the recession, state and local governments temporarily increased taxes and fees to tide them over. Those measures are ending now, just as the extraordinary assistance from the 2009 federal economic stimulus plan draws to a close.

That has left fewer places to tap revenues, especially as states' voters and leaders such as Virginia Governor Bob McDonnell slam the door on the possibility of future tax increases. The only tax increase on a state ballot in November, in Colorado, failed.

Meanwhile, the U.S. Congress is fighting over any spending increases, which means that the federal government will likely send fewer dollars to the states, which are likewise cutting local aid.

(Reporting By Lisa Lambert; Additional reporting by Lucia Mutikani; Editing by Theodore d'Afflisio)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[Skeetshooter]

02:13 PM on 12/21/2011

Oh nooooooo... What can Republicans do to stall recovery before the elections? They must be panicking.

[loki]

12:25 PM on 12/21/2011

just because states are raising taxes to make up for the losses from the Fed portions due to all the tax breaks for billionaires and corporations, doesn't mean things are getting better. Just means the little guys like me and you are getting much higher property tax bills, and extra taxes on everything from telephone to gas and electric , water and sewer bills. The states are raising taxes on everything they can think of. That doesn't mean things are getting better. Just they are taking more to make up for what the richest refuse to pay

[David Hundley]

10:46 AM on 12/21/2011

Most people are fleeing the states looking for work, while the rest try to keep a home.
The Tax Revenue has to coming from the fees on telecommunications, the payroll tax income is still going down. Congress raises our taxes by $1,000.00 next year. X2 for married couples.
Why can't congress do more with less?

[uniquindividual]

08:28 PM on 12/21/2011

They are fleeing the states? Are they moving to Canada?

[robodawa]

10:10 AM on 12/21/2011

I'm so happy that all of the state workers who retired at 50 will have full dental, medical and cost of living increases until the day they die. I was really worried they might have to do something like go back to work.

[megwright]

12:59 PM on 12/21/2011

I don't know any states that allow workers to retire at 50, although the early retirement age for my corporation was 50. One way European countries manage unemployment is to allow workers to retire early, thus clearing the way for younger workers to have jobs.

I suspect you're also implying that state workers get gold-plated retirement benefits, yet in the private sector my health care cost 1/10th of what it cost state workers, and our retirement benefits were indeed considered gold-plated, unlike the public sector.

[uniquindividual]

08:30 PM on 12/21/2011

Your problem is obvious

http://rlv.zcache.com/your_problem_is_obvious_business_card-p240211563102148177z74gr_400.jpg

[Calilover Calilover]

08:50 AM on 12/21/2011

which is more important the people having more money in their pockets or the wasteful partisan congress having that money?

[mdlawyer2]

10:26 AM on 12/21/2011

Kind of off point, as the article deals with state and local government revenues and not federal revenues (Congress isn't a part of this story at all).

[Calilover Calilover]

03:12 PM on 12/21/2011

you're a lawyer

affirmative action??
its all the same fed state local

its all government

[Durrrrrr]

08:43 AM on 12/21/2011

"State, Local Government Revenues Rising, Signaling Hope For Recovery"

What a stupid title by HP. State and local government tax revenues are widely known (by intelligent people) to be a lagging indicator. An economically sound title would be "State, Local Government Revenues Rising, Confirming Economic Recovery Began Several Quarters Ago"

[spinotter11]

09:40 AM on 12/21/2011

Isn't the term recovery just the opposite of recession? In that case we have been in recovery mode since June of 2009, according to the NBER and other statistic analyzers.