Financial District
Financial District by John Latta S cary state tax collection shortfalls may infl uence the creation some of the machinery of any new reautho-rization bill. States facing almost unprecedented in-come shortages are getting worried that they may be unable to meet matching requirements when looking for federal dollars. The possibility of an ARRA-style waiver of the matching requirement, or at least some tweaking to provide short-term fl exibility, is likely to come up for serious discussion in both state capitals and Washington. State tax collections for the second quarter of 2009 dropped 16.6 percent, marking the second consecutive quar-ter in which revenues fell more sharply over the same period of the previous year than during any previous time on re-cord according to the latest quarterly report on state revenue collections issued by the Rockefeller Institute of Government. All but one state (Vermont) saw total revenue fall. Thirty-six states reported double-digit decreases. Both those num-bers were up from the fi rst quarter of this year. And, according to early signs, more troubling news is likely for the third quarter. What's more, some predictions suggest it will be 2014 or 2015 before state revenues return to pre-recession levels. A steeper, slower climb out What this means of course is that any economic recov-ery will take its time getting states back to where they were, which in turn means many, perhaps most, states will struggle to come up with matching funds to make full use of federal transportation dollars. With state and local dollars account-ing for half, or more, of the total amount spent on roads and bridges and local revenues as hard hit as state income future road and bridge construction may face a prolonged, slow climb back to our most recent idea of normalcy. It is also leading states to consider becoming more inno-vation in their relationship with Washington, at least in the short term, as a reauthorization bill hovers on the brink of delay after delay, according to one Washington association executive who says a ARRA-style waiving or reworking of matching requirements is one idea that will almost certainly be considered by states lobbying the bill's writers. Another question this raises is just how much money will be needed in a reauthorization bill, according to sources in Washington. The House Transportation and Infrastructure Committee's chairman Jim Oberstar wants a $500 billion bill (75 percent for highways) but if states and local govern-ments have nothing in the cupboard raw Washington dol-lars may have to be increased. These numbers are appearing as the Federal Reserve reports the national economy is showing modest improve-ments in its latest Beige Book, an eight times year review from businesses across America. The Fed said gathered in-formation indicated either stabilization or modest improve-ments in many sectors since the last report, albeit often from depressed levels. But the Book's hesitant optimism may refl ect a limited relief. Many econonists believe that the national recession has ended and that a tepid recovery is now underway, wrote the authors of the Rockefeller report, the Institute's senior policy analyst Lucy Dadayan and senior fellow Donald J. Boyd. In fact, the state coincident economic indexes we include in this report show that 41 states had declining economies in Slumping tax receipts threaten existing programs and future plans 36 November 2009 Better Roads State and Local Coffers Taking Major Hits of that period, the in-come tax declined sharply and bypassed the sales tax decline in the first and second quarters of 2009, rela-tive to the same peri-ods a year earlier. Second quarter revenues fell by amounts unseen in at least five decades. To-tal state tax revenue in the second quarter of 2009 declined by 16.6 percent relative to a year ago, before ad-justments. The income tax was down by 27.5 percent, the sales tax was down by 9.5 percent, and the corporate income tax increased by 2.9 percent. Tables 1 and 2 portray growth in tax revenue with and without adjustment for inflation, and growth by major tax, re-spectively. Table 1 does not include adjustment for legislative changes. Total tax revenue declined in 49 states in the second quar-ter of 2009, up from 45 states during the first quarter of 2009. (The 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local -1% 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local -5% -3% -1% 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local -9% -7% -5% -3% -1% 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local -11% -9% -7% -5% -3% -1% 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local -11% -9% -7% -5% -3% -1% 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local Sources: U.S. Census Bureau (tax revenue) and Bureau of Economic Analysis (GDP price index). Notes: (1) 4-quarter average of percent change in real tax revenue; (2) No adjustments for legislative changes. -11% -9% -7% -5% -3% -1% 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local Sources: U.S. Census Bureau (tax revenue) and Bureau of Economic Analysis (GDP price index). Notes: (1) 4-quarter average of percent change in real tax revenue; (2) No adjustments for legislative changes. 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax -2% 0% 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax -16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax -16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax Sources: U.S. Census Bureau (tax revenue) and Bureau of Economic Analysis (GDP price index). Notes: (1) 4-quarter average of percent change in real tax revenue; (2) No adjustments for legislative changes. -16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax Sources: U.S. Census Bureau (tax revenue) and Bureau of Economic Analysis (GDP price index). Notes: (1) 4-quarter average of percent change in real tax revenue; (2) No adjustments for legislative changes. of that period, the in-come tax declined sharply and bypassed the sales tax decline in the first and second quarters of 2009, rela-tive to the same peri-ods a year earlier. Second quarter revenues fell by amounts unseen in at least five decades. To-tal state tax revenue in the second quarter of 2009 declined by 16.6 percent relative to a year ago, before ad-justments. The income tax was down by 27.5 percent, the sales tax was down by 9.5 percent, and the corporate income tax increased by 2.9 percent. Tables 1 and 2 portray growth in tax revenue with and without adjustment for inflation, and growth by major tax, re-spectively. Table 1 does not include adjustment for legislative changes. Total tax revenue declined in 49 states in the second quar-ter of 2009, up from 45 states during the first quarter of 2009. (The 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local -1% 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local -5% -3% -1% 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local -9% -7% -5% -3% -1% 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local -11% -9% -7% -5% -3% -1% 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local -11% -9% -7% -5% -3% -1% 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local Sources: U.S. Census Bureau (tax revenue) and Bureau of Economic Analysis (GDP price index). Notes: (1) 4-quarter average of percent change in real tax revenue; (2) No adjustments for legislative changes. -11% -9% -7% -5% -3% -1% 1% 3% 5% 7% 9% Year-Over-Year Percent Change in Real State Taxes and Local Taxes Four-Quarter Average of Percent Change State Local Sources: U.S. Census Bureau (tax revenue) and Bureau of Economic Analysis (GDP price index). Notes: (1) 4-quarter average of percent change in real tax revenue; (2) No adjustments for legislative changes. 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax -2% 0% 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax -16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax -16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax Sources: U.S. Census Bureau (tax revenue) and Bureau of Economic Analysis (GDP price index). Notes: (1) 4-quarter average of percent change in real tax revenue; (2) No adjustments for legislative changes. -16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Income tax Sales tax Property tax Sources: U.S. Census Bureau (tax revenue) and Bureau of Economic Analysis (GDP price index). Notes: (1) 4-quarter average of percent change in real tax revenue; (2) No adjustments for legislative changes. courtesy of the Rockefeller Institute of Government