The 15 biggest states are estimating that they will take in 4% more revenue in 2011 than in 2010. That's significant because revenue has been declining since 2008, putting pressure on budgets and on municipal bond ratings.
Some states are already starting to feel the upswing in revenue. Bloomberg is reporting that:
"California took in 3.9 percent more since December than projected in January, Controller John Chiang said this month. New York got $129 million above forecasts in its budget year through February, according to a report from Comptroller Thomas DiNapoli. In New Jersey, the second-wealthiest state per capita, January sales-tax collections were 1.9 percent higher than a year earlier, the first annual increase in 19 months, forecasters said in a report last month.
“This time last year, we were sliding down a mountain,” said David Rosen, chief budget officer for the New Jersey Legislature. “I don’t think we are now; it’s stabilized.”
That's good news for investors who were worried about municipal bond defaults. Both states and city and local governments should soon have a bit more breathing room to operate. Still a 4% increase in revenue won't help erase a $1 trillion gap between assets in public pension plans and their obligations to retirees (based on a Feb. 18 study by the Washington-based Pew Center).
Even with a reviving economy states are going to have some tough choices to make.
Comments
soczie
March 30, 2010
State Treasurers are making projections that are wildly optimistic, but none of them have accounted for the effects of the decline in unearned income. Look at the savings charts and CD charts on BestCashCow.com. There are boatloads of cash that are used to earning 3-6% and are now earning under 1% APY. Someone with $2 million in savings accounts used to pay $15,000 to $30,000 in state taxes on that income alone. For 2009-10, they are paying $1,000 to $2,000.
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