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States moved beyond budget crises in 2012: Census

Men walk on a colored map of the United States in a park in Hoboken, New Jersey October 31, 2012. REUTERS/Adrees Latif
Men walk on a colored map of the United States in a park in Hoboken, New Jersey October 31, 2012. REUTERS/Adrees Latif

By Lisa Lambert

WASHINGTON (Reuters) - The worst of the budget crunch that afflicted state governments after the 2008 financial crisis appears over, data from the Census showed on Thursday.

The Census reported that state tax collections last year surpassed their previous peak, and all but three states registered a surge in receipts.

States collected a record $794.6 billion in fiscal 2012, which for most ended last June 30. That was $34.3 billion more than the prior year and $14.9 billion more than the previous record $770.7 billion brought in during fiscal 2008.

California's tax collections topped those of all other states, bringing in $112.37 billion, or 14 percent of the total in the country. Nonetheless, alongside Wisconsin and New Hampshire, it registered a decrease from the year before.

"The explanation for each state's year-to-year changes vary," said the Census in the report. "California's tax revenue decline was due to expiration of the temporary rate increase for the general sales and gross receipts tax."

New York collected the second most taxes, $71.55 billion, followed by other states with large populations: Texas at $48.6 billion, Illinois at $36.44 billion, Florida at $33 billion and Pennsylvania at $32.95 billion. South Dakota collected the least taxes, $1.52 billion, followed by New Hampshire at $2.21 billion and Montana at $2.46 billion.

The 2007-09 recession, financial crisis and housing market downturn conspired to push almost all states' revenues down to lows not seen for decades.

In turn, states confronted unprecedented budget crises, with many calling emergency legislative sessions to make quick spending cuts or enact temporary tax hikes. The federal government stepped in with the largest transfer of money to states in U.S. history in the 2009 economic stimulus plan.

Crawling out of the revenue crater has been slow for most states, and recent improvements are threatening to turn sluggish.

"The latest data show that state tax revenue is continuing to recover, albeit slowly, from the depth of the recession," said Donald Boyd, senior fellow at the Nelson A. Rockefeller Institute of Government, in a statement.

In fiscal 2012 states' sales tax receipts increased 2.9 percent to $242.7 billion, compared to the 5.8 percent rise the year before. Individual income taxes, which provide the most revenues, increased 8.1 percent to $280.4 billion after rising 9.8 percent the previous year. Not all states charge income or sales taxes.

In general, the recovery began unevenly as states that found fortune in the housing market expansion struggled long after commodities-rich states found stable fiscal footing.

"In the case of Alaska and North Dakota, increased tax revenue was largely due to strength in severance tax revenues, which are taxes imposed for the extraction of natural resources," the Census said.

Altogether eight states had tax collection increases of 10 percent or more in fiscal 2012, with North Dakota on top at 47 percent. Alaska followed with 27.3 percent, then came Illinois at 19 percent, Connecticut at 15 percent. Hawaii, Oklahoma, Texas and South Dakota rounded out the group.

Much of the strength came from rising income taxes, Census said. Illinois had the sharpest increase in individual income tax collections, 39.8 percent, followed by Hawaii, 23.5 percent, and Oklahoma, 16.3 percent.

(Editing by David Gregorio)

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