More bad news for state and local budgets. The Rockefeller Institute is reporting that the rate of growth of state and local tax collections slowed in the second quarter of 2012, even as revenues from these taxes remain below the peak year of 2008.
Taxes grew 3.2 percent over the same quarter last year, but adjusted for inflation tax collections were 7.7 percent lower in the second quarter than in the same quarter in 2008. Those results suggest the economy may be slowing. More importantly, they may force states and municipalities to readjust their budgets for the fiscal year that began July 1 if tax collections continue to slow. Data from the Bureau of Economic Analysis suggest that seasonally adjusted spending by state and local governments in the second quarter of this year was only marginally higher than last year. Since the cost of employing workers, especially benefit costs like health care, continue to rise, further softness in tax revenues may lead to a new round of state and local worker job cuts.The bottom line is that four years of subpar tax collections have changed some state budgets permanently.