‘Gloomier and More Uncertain’ Outlook for State Budgets
The Texas State Capitol in Austin. Shutterstock
A new report from the State University of New York highlights sluggish state revenue growth in recent quarters.
Offering a somewhat ominous sign for state fiscal health, a slowdown in tax revenue growth that began in the middle of last year has persisted into 2016, according to a report released this week, authored by public policy analysts at the State University of New York.
The lagging tax collections, combined with volatility and weakness in the stock market, and fallout from the “Brexit” referendum, in which British voters backed leaving the European Union, “suggests that the outlook for state budgets in the 2016-17 state fiscal year, which begins on July 1st in forty-six states, has become gloomier and more uncertain,” Lucy Dadayan and Donald J. Boyd, of The Nelson A. Rockefeller Institute of Government, wrote in the report.
According to their findings, preliminary figures for the first quarter of 2016, which covers January through March, show lackluster overall state tax revenue growth of about 1.9 percent, compared to the same time period in the previous year. The same 1.9 percent growth rate occurred during the final quarter of 2015. The preliminary data for the first quarter of 2016, the report says, indicate that 14 states saw declines in overall tax revenue collections, while 36 reported growth.
The median, quarterly total tax growth rate for states, on a year-over-year basis, between the first quarter of 2005 and the final quarter of 2015, was about 4.7 percent, according to U.S. Census Bureau data used in the Rockefeller Institute report.
Dadayan and Boyd point to significantly slower growth rates for taxes on personal income and sales, along with declines in corporate income tax collections, as key factors contributing to the overall weakness in revenues during the last two quarters. Meanwhile, states that depend on taxes from industries tied to fossil fuels have seen revenues dwindle amid low oil and gas prices during the last two years, as well as bankruptcies and other pressure in the coal sector.
Earlier this month, The National Association of State Budget Officers issued a report saying that state spending and revenues were finally showing signs this fiscal year of recovering to pre-recession levels. But the report also noted that progress toward that point has been slow and that financial performance in states across the U.S. remains uneven.
A full copy of the Rockefeller Institute report can be found here.
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