Revenues Up In Some States But Don't Pop Champagne Corks Yet
Not much in the way of good news has come out of state capitals in recent years, with most states struggling with deficits, layoffs and cuts to essential services.
So the spate of good budget news is definitely worth nothing. This week word came that tax revenues were significantly higher than expected in several large states — California, Michigan and New Jersey.
New York earlier forecast it would take in $2 billion more than it anticipated.
California's numbers crunchers revised their estimate $6.6 billion higher than they had earlier forecast. That should really help make a dent in the $15 billion deficit the state is running on its $127.4 billion budget.
That the state's budgeters could be off by $6.6 billion suggests that budgeting at this level is as much art as science. Also, their estimates were intentionally superconservative given the continued fallout from the bursting of the real estate bubble.
Michigan's revenue is an estimated $429 million higher than forecast while New Jersey's is up almost $1 billion, $917 million to be more precise.
But John Gramlich of Stateline.org observes that the situation may look so good now because of how bad it was not that long ago:
Despite the good news, fiscal experts have long stressed that improving revenue projections might be erroneously cast as "surpluses" when, in fact, revenue numbers for most states are still far below what they were before the recent recession began.
"You might have some ridiculously high-sounding revenue growth... but that's because the base is so low," Scott Pattison, the executive director of the National Association of State Budget Officers, told Stateline earlier this year. "I've been telling a lot of people, 'Compare the budget totals to pre-recession levels, because that's a better measure. Don't assume happy days are here again.' "
Meanwhile, Robert Frank over at The Wall Street Journal's The Wealth Report blog, writes that the rich have rescued the states.
California, New York and New Jersey get more than 40% of their personal income-tax revenue from the top 1% of taxpayers. When the incomes of those taxpayers crashed in the financial crisis, their tax payments also plunged. A substantial part of the budget shortfall in New York, California, New Jersey and others states owed to the decline in incomes of the rich–and more specifically, the decline in stock markets and capital gains.
Now, stock markets have recovered and so have the rich. It follows, therefore, that as the incomes of the rich are soaring again (all those Facebook billionaires and hedge-funders), so are their tax payments.
Predictably, the higher revenue in California is being seen by both Democrats and Republicans as bolstering positions they held before estimated tax revenues were revised upward.
Gov. Jerry Brown intends to pursue tax increases meant to close the deficit further while Republicans say the new revenues are a strong argument against the tax increases.
From the Los Angeles Times:
The governor's continued push for more revenue, however, is complicated by the unexpected receipts: Republican lawmakers are already pointing to the revenue surge as one reason to block his plans.
"With $6.6 billion in new revenues, Republicans are right — we don't need, and it's ridiculous to ask voters for, five years of new taxes," said a statement issued by GOP Senate leaders.
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