Lately there's been a growing chorus of good news about state tax collections. As the economy improves, albeit slowly, states are reporting significantly better tax collections. In Texas, sales tax collections, a clear reflection of consumer spending, have risen for nine straight months. In New York, sales tax collections ended 2010 up 8.3 percent. In Rhode Island, income tax collections are up 3 percent in the first half of the fiscal year.
Now the bad news: These gains, coming off a low base after two years of revenue declines, won't be nearly enough to help states avoid dealing with big budget deficits. Total state tax revenues declined 15 percent during the depths of the economic downturn and have not yet recovered to their pre-2008 levels. Thus, though higher collections helped Maryland finish out its fiscal year with a small surplus, the state is still projecting a budget shortfall of at least $1.3 billion in its coming fiscal year. New York's budget deficit is estimated at $9 billion, while Texas faces a deficit of at least $15 billion. And these deficits don't reflect the larger, long-term problem many states have with their pension liabilities. Clearly, as the National Association of State Budget Officers has argued, the road back from this downturn is going to be long and painful for states.
Now the bad news: These gains, coming off a low base after two years of revenue declines, won't be nearly enough to help states avoid dealing with big budget deficits. Total state tax revenues declined 15 percent during the depths of the economic downturn and have not yet recovered to their pre-2008 levels. Thus, though higher collections helped Maryland finish out its fiscal year with a small surplus, the state is still projecting a budget shortfall of at least $1.3 billion in its coming fiscal year. New York's budget deficit is estimated at $9 billion, while Texas faces a deficit of at least $15 billion. And these deficits don't reflect the larger, long-term problem many states have with their pension liabilities. Clearly, as the National Association of State Budget Officers has argued, the road back from this downturn is going to be long and painful for states.
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