Transcript FISCAL FITNESS ON THE WEB

Coping with Effects of Recession
in the States
Government Research Association Annual Conference
The Brookings Institution
Washington, DC
July 27, 2009
Donald J. Boyd, Senior Fellow
[email protected]
Nelson A. Rockefeller Institute of Government
The State University of New York
www.rockinst.org
Richard P. Nathan and Thomas L. Gais, Co-Directors
Robert Ward, Deputy Director
1
Current conditions
• Employment declining in every state except ND (appendix)
• FL, SC, GA, AZ, VA, NV, UT and CA all had 10+% declines in real percapita tax revenue since 2007. Other states (e.g., NY) hit harder
recently
• State tax revenue down 11.7% in Jan-Mar 2009 quarter
– worst in at least 50 years
– 44 states had declines
– revenue fell to levels last seen in 2005
• Apr-Jun, when income tax returns for prior tax year (2008) are filed and
people settle up, always crucial:
– April/May PIT fell 33%
– Sales tax for quarter also fell dramatically
• Result: much larger budget shortfalls at very time states were
negotiating budgets
• Will lead to midyear cuts and new round of very difficult revenue and
spending decisions in January-June of 2010
• Already-public gaps for FY 2011 exceed $50b, but they will grow
2
Recessions and state-local finances
• Most of the “action” – in terms of automatic
impact of recession on finances – is on the
revenue side of the budget
• Different revenue structures, different impacts:
– Feds have the most volatile revenue structure (But
who cares? Annual balance not a goal)
– States almost as volatile – and they must balance
annual budgets. Ouch.
– Local governments (and states that rely on property
taxes) generally less volatile. State aid often a great
source of risk and volatility.
• Different recessions, different risks, different
impacts on states – depends on interaction of
economic turmoil with state revenue structures
3
Feds: Revenue oriented toward income taxes
States: Income and sales (with significant exceptions!)
Locals: Property tax and non-tax revenue
- Great variation across states Government revenue in fiscal year 2006
Revenue components
as % of own-source total
Revenue in $ billions
Federal
General revenue
Own-source revenue
Nontax
Total Taxes
Individual income tax
General sales tax
Property tax
Corporate income tax
Other taxes
State
Local
Federal
State
Local
$2,399.4
$1,385.4
$1,243.7
100.0
143.4
162.0
2,399.4
101.8
2,297.6
1,846.1
0.0
0.0
350.0
101.5
966.2
255.4
710.9
245.9
226.7
11.8
47.5
179.0
767.6
283.2
484.4
22.7
55.5
347.3
5.5
53.4
100.0
4.2
95.8
76.9
0.0
0.0
14.6
4.2
100.0
26.4
73.6
25.4
23.5
1.2
4.9
18.5
100.0
36.9
63.1
3.0
7.2
45.2
0.7
7.0
Sources: Federal - U.S. Department of the Treasury Financial Statements for 2006, re-categorized by Rockefeller
Institute; State and local - U.S. Bureau of the Census
Notes: Federal individual income tax includes FICA and other payroll taxes. Federal, state, and local taxes exclude
unemployment insurance taxes.
4
Which taxes are most volatile?
Standard deviation of annual percentchange in real per-capita tax revenue
1980 to 2006, state and local governments in U.S.
as a whole, no legislative adjustments
Corporate income tax
Income tax
Sales tax
Property tax
All other taxes
9.2
4.6
2.7
1.9
1.8
Source: Rockefeller Institute analysis of data from
Census Bureau, BEA
5
Sales tax hit first, income tax recently doing even
worse, property tax still stable (US as a whole)
Inflation-adjusted state-local tax revenue for nation as a whole, by major source
4-quarter average of year-on-year growth
12
10
General sales tax
Individual income taxes
Property taxes
8
4
2
Q
1
Q
4
20
09
Q
3
20
08
Q
2
20
08
Q
1
20
08
Q
4
20
08
Q
3
20
07
Q
2
20
07
Q
1
20
07
Q
4
20
07
Q
3
20
06
Q
2
20
06
Q
1
20
06
Q
4
20
06
Q
3
20
05
Q
2
20
05
Q
1
20
05
Q
4
20
05
Q
3
20
04
Q
2
20
04
-2
20
04
Q
1
0
20
04
% change vs. year ago
6
-4
-6
Sources: Census Bureau (tax revenue) and BEA (GDP price index)
6
Despite housing price declines, property tax has
kept local revenue more stable than state
State Taxes are Faring Worse Than Local Taxes
Year-Over-Year Percent Change in Real State Taxes and Local Taxes
Four-Quarter Average of Percent Change
10%
State
Local
8%
6%
4%
2%
0%
-2%
-4%
20
04
Q1
20
04
Q2
20
04
Q3
20
04
Q4
20
05
Q1
20
05
Q2
20
05
Q3
20
05
Q4
20
06
Q1
20
06
Q2
20
06
Q3
20
06
Q4
20
07
Q1
20
07
Q2
20
07
Q3
20
07
Q4
20
08
Q1
20
08
Q2
20
08
Q3
20
08
Q4
20
09
Q1
-6%
Sources: U.S. Census Bureau (tax revenue) and Bureau of Economic Analysis (GDP price index).
Notes:
(1) 4-quarter average of percent change in real tax revenue; (2) No adjustments for legislative changes.
7
Capital gains volatility causes huge income tax swings,
especially in April-June quarter
Capital gains as % of gross domestic product
8
1986 tax
reform
7
2000
2007
estimate
6
5
4
3
median for period
2008 ?
2
1
0
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
Sources: (1) Capital gains: 1954-1998: Table capgain1-2001.pdf from IRS Statistics of Income web site (www.irs.gov/taxstats); 1999-2006 06in14ar.xls and similar SOI files;
2007 based on preliminary data from Spring 2009 SOI Bulletin; (2) Gross domestic product from U.S. Bureau of Economic Analysis
8
Sales tax: Real retail sales worse than past recessions
Bad for most state governments and some locals
Real monthly retail sales indexed to start of recession, selected recessions
From recession's start through 36 months after
110
105
100
0
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
1973 Nov
1980 Jan
1990 Jul
2001 Mar
2007 Dec
95
90
June 2009
85
Sources: Retail sales: St. Louis Federal Reserve Bank and Census Bureau; CPI-U (for price adjustment): Bureau of Labor Statistics
9
Tax revenue shortfalls in FY 2009 will rival or
exceed 2002. Incipient shortfalls for 2010.
State tax revenue shortfalls in periods near recessions
Adopted-budget projections compared with actual results (or, for 2009, most-recent estimates)
Shortfall in $ millions
Shortfall as % of tax source
1991 recession period
Fiscal year
1989
Sales tax
557
1990
1991
1992
1990-1992 Sum
(1,100)
(4,502)
(2,408)
(8,010)
1994
1,492
Sum of major
taxes
3,326
Sales tax
0.6%
(3,148)
(3,269)
(1,125)
(7,542)
(5,275)
(12,574)
(8,380)
(26,229)
-1.2%
-4.6%
-2.3%
-2.7%
-1.1%
-4.6%
-4.4%
-3.4%
-12.6%
-13.4%
-4.9%
-10.4%
-2.5%
-5.6%
-3.5%
-3.9%
1,178
1,906
1.4%
-0.7%
4.8%
0.8%
Income tax Corporate tax
3.9%
1.9%
Sum of major
taxes
3.2%
Income tax Corporate tax
2,769
n/a
(1,027)
(4,803)
(4,847)
(10,677)
(764)
Income tax Corporate tax
3.2%
n/a
Sum of major
taxes
1.9%
2001 recession period
Fiscal year
2000
2001
2002
2003
2001-2003 Sum
2004
Sales tax
4,756
542
(5,450)
(5,866)
(10,774)
877
Income tax
7,020
Corporate
tax
615
Sum of major
taxes
12,391
Sales tax
2.7%
944
(27,504)
(19,285)
(45,845)
(1,759)
(6,177)
(1,135)
(9,071)
(273)
(39,131)
(26,286)
(65,690)
0.4%
-3.3%
-3.4%
-2.3%
0.6%
-12.8%
-9.7%
-8.0%
-7.2%
-21.3%
-4.1%
-11.2%
-0.1%
-9.5%
-6.6%
-5.8%
3,210
2,090
6,177
0.5%
1.7%
7.7%
1.6%
Income tax
10,046
Corporate
tax
5,916
Income tax Corporate tax
4.0%
12.6%
Sum of major
taxes
3.3%
2007 recession period
Fiscal year
2007
2008
2009
Sales tax
730
(3,638)
(12,304)
5,714
(26,432)
(1,282)
(9,096)
Sum of major
taxes
16,692
Sales tax
0.3%
794
(47,832)
-1.7%
-5.6%
2.1%
-9.3%
-2.5%
-17.4%
0.1%
-8.6%
NOTES: (1) FY 2009 based on spring responses, before shortfalls in income tax returns and sharp deterioration in sales tax, (2) Actual shortfalls for FY 2009
will be much larger than the numbers shown above (reported by NASBO in Spring 2009), (3) FY 2001 does not include California
Source: NASBO/NGA Fiscal Survey of the States, fall of relevant year for prior recessions; spring 2009 for 2007 current recession
10
“Automatic” spending responses to recession: Less
significant than revenue, longer lags
•
Medicaid – mostly financed by state governments
– About two thirds of Medicaid spending is for elderly and disabled
– “1 percentage point rise in the national unemployment rate would increase Medicaid
and SCHIP enrollment by 1 million (600,000 children and 400,000 non-elderly adults)
and cause the number of uninsured to grow by 1.1 million. That would increase
Medicaid and SCHIP costs by $3.4 billion, including $1.4 billion in state spending. This
represents a 1 percent increase in total Medicaid and SCHIP expenditures.” (Dorn, et
al.)
– That’s about $5.6b for 4 pt. unemployment rise, compared with state budget gaps
exceeding $160 billion
•
•
K-12 education – mostly financed by state gov’ts and local gov’ts; largely driven
by policy choices (some aid can be partly driven by economic factors)
Higher education – financed primarily by state gov’t
– Jobs harder to get, good time to stay in school and build skills
– Noticeable increases in community college enrollment during recessions
•
•
Cash and other assistance – less than 2% of state-funded expenditures, very
little paid by locals. Much of this is now block-grant funded.
Pension contributions – small budget share, but swings are large enough to be
meaningful
– 1-1.5% of SG expenditures on average (guess); 3-3.5% of LG on average
– Subject to LARGE LAGGED swings, great variation across states
– Small share of budget, but huge swings mean still can have meaningful impact
11
Policy responses
12
A stylized view
•
Extreme tax revenue volatility, coupled with
– stable to rising spending pressures in recession
– requirement to strive for annual budget balance
– relatively few rules about "quality" of balance (does not need to be sustainable, or
reflect GAAP concepts, etc.)
– generally no legal requirement to strive for budget balance in the year after the
budget year
– short electoral cycles
•
Lead to
– view that “the world ends in 13 months” (e.g., if negotiating budget in June for
year ending next June)
– anything that closes the current budget gap can be acceptable, even if it simply
shifts resources from the future (e.g., securitize tobacco or lottery revenue)
– hierarchy of pain - drawing down reserves first, and taking other temporary and
easy actions first (hiring freezes), with deep spending cuts and tax increases often
deferred until later in the crisis
– hard to make structural reforms if fiscal benefits come after the budget year but
political costs come at time of enactment
•
•
Natural response: states push large parts of fiscal problems into later years.
Fiscal crises are rarely “solved” in the first year - it can take 3 or 4 years
before finances recover, even if economic recovery comes sooner
2001 crisis went much like this
13
The 2001 crisis
Timing of state government response to the 2001 fiscal crisis
Indicators of the magnitude
of the crisis
Fiscal year
2001
2002
2003
2004
2005
Revenue
Real per-capita
shortfall
tax revenue (income, sales,
growth
and corporate
taxes)
0.1%
-7.0%
-0.6%
3.6%
5.3%
-0.1%
-9.5%
-6.6%
1.6%
4.2%
Responses as % of tax revenue
(Positive numbers reduce the budget gap)
What happened to
total spending?
Tax and
revenue
enactments
Growth in real percapita spending
financed from own
sources
Use of fund
balance
0.8%
4.8%
0.3%
-1.9%
-2.9%
Midyear
budget cuts
0.3%
2.6%
1.5%
0.4%
0.1%
-1.0%
0.1%
1.5%
1.6%
0.5%
3.4%
2.0%
0.3%
-2.2%
2.7%
Sources: Rockefeller Institute analsis of (1) data on fund balances, midyear budget cuts, and tax and revenue enactments from
NASBO/NGA Fall Survey of the States, and (2) Tax and expenditure data from the Census Bureau.
14
Tax increases will be larger than last crisis (and
larger than initially proposed) [NASBO]
15
Gov’t employment: Not easy for state gov’ts to save big money. A
larger target for locals, but most employment is in “core” services
•Local gov’t: about 74% of
state-local employment
•Education by far the largest
function for local and state
gov’ts
•Then public protection
•These can be difficult areas to
cut
•Wages: about 13+% of state
gov’t spending, 38+% of local
gov’t spending
•CA one-year budget gap $26
billion; state gov’t wages in
2007: $25 billion. Could lay off
virtually entire CA state gov’t
and not close the gap.
State and local full-time-equivalent employment, 2007
# of FTEs
Function
State
Total
4,307,359
Education (including libraries)
Elementary & secondary
Higher education, other
education, libraries
Percent of total
Local
State
Local
12,146,947
100.0%
100.0%
1,740,789
52,143
7,218,382
6,762,253
40.4%
1.2%
59.4%
55.7%
1,688,646
456,129
39.2%
3.8%
Public protection
Police
Fire
Corrections
577,082
106,620
470,462
1,423,482
826,594
336,693
260,195
13.4%
2.5%
0.0%
10.9%
11.7%
6.8%
2.8%
2.1%
Health & hospitals
600,404
823,743
13.9%
6.8%
Public welfare & social insurance
administration
314,718
283,493
7.3%
2.3%
Transportation & transit
278,106
557,333
6.5%
4.6%
Parks, natural resources, water,
sewer
184,605
677,508
4.3%
5.6%
Judicial & legal
172,913
250,407
4.0%
2.1%
Housing & community
development
-
113,466
0.0%
0.9%
Electric & gas utilities
4,040
86,555
0.1%
0.7%
434,702
712,116
10.1%
5.9%
Administration & other
Source: U.S. Bureau of the Census
16
Gov’t employment more stable than private, and lagged.
Local likely worse than prior recessions.
Monthly Employment By Sector Indexed to Start of 1990 Recession
Monthly Employment By Sector Indexed to Start of 2001 Recession
1 Year Before Peak, Through 3 Years After
1 Year Before Peak, Through 3 Years After
105
105
104
104
Private
State
Local
103
103
102
96
96
95
95
94
94
Source: BLS Current Employment Statistics
Source: BLS Current Employment Statistics
Monthly Local Government Employment in Recent Recessions
1 Year Before Through 3 Years After Start
Indexed to Business Cycle Peak
Monthly Employment By Sector Indexed to Start of 2007 Recession
One Year Before Peak, Through Latest Month
105
105
104
104
103
101
100
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
98
Index (Business Cycle Peak=100)
103
Private
State
Local
102
Index (December 2007=100)
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
98
97
97
99
Dec-00
99
Sep-00
98
100
Jun-00
Jul-93
Apr-93
Jan-93
Oct-92
Jul-92
Apr-92
Jan-92
Oct-91
Jul-91
Apr-91
Jan-91
Oct-90
Jul-90
Apr-90
Jan-90
Oct-89
99
Private
State
Local
101
Mar-00
100
Index (March 2001=100)
101
Jul-89
Index (July 1990=100)
102
102
100
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
99
98
97
97
96
96
95
95
94
94
Source: BLS Current Employment Statistics
1990
2001
2007
101
Source: Bureau of Labor Statistics, Current Employment Statistics
17
A few states have made significant cuts, but
declines are much smaller than private job loss
Percent change in employment, June 2008 to June 2009
Private
Michigan
Arizona
Nevada
Oregon
Idaho
North Carolina
Indiana
Georgia
California
Tennessee
Florida
Ohio
Delaware
Colorado
Alabama
Illinois
South Carolina
Kentucky
Wisconsin
Utah
Vermont
Minnesota
Hawaii
Kansas
Rhode Island
(9.4)
(8.5)
(7.1)
(6.8)
(6.4)
(6.1)
(6.1)
(6.1)
(6.0)
(5.9)
(5.9)
(5.8)
(5.7)
(5.6)
(5.6)
(5.4)
(5.4)
(5.3)
(5.2)
(5.0)
(4.9)
(4.8)
(4.6)
(4.5)
(4.5)
State &
local
(0.1)
(3.8)
(3.3)
0.3
3.3
2.5
(1.2)
0.0
(1.0)
3.4
(1.0)
(1.6)
(0.2)
2.2
(1.2)
0.1
(2.5)
(1.8)
1.9
3.6
0.4
0.8
1.2
(1.1)
(3.5)
Private
Washington
New Mexico
Connecticut
Mississippi
New Jersey
Wyoming
West Virginia
Virginia
Missouri
Maine
Massachusetts
Pennsylvania
Oklahoma
Texas
Iowa
New Hampshire
Arkansas
Maryland
New York
Montana
Nebraska
South Dakota
Louisiana
Alaska
North Dakota
(4.4)
(4.4)
(4.3)
(4.2)
(4.2)
(3.9)
(3.8)
(3.7)
(3.7)
(3.6)
(3.6)
(3.6)
(3.6)
(3.5)
(3.4)
(3.2)
(3.2)
(2.9)
(2.8)
(2.5)
(2.5)
(2.2)
(1.3)
(0.7)
1.1
State &
local
0.4
0.9
(0.9)
3.1
(0.2)
2.2
0.4
(0.5)
0.9
(2.1)
(0.8)
0.4
4.7
2.3
0.0
5.4
2.6
0.4
(0.3)
6.7
2.3
1.4
1.9
1.5
3.1
Source: Bureau of Labor Statistics, Current Employment Statistics
Note: Seasonally adjusted by Rockefeller Institute (X11)
18
State gov’t employment still up from year ago for
US as a whole, but down in 24 states
State government employment % change, June 2008 to June 2009
United States
Arizona
Indiana
Ohio
Rhode Island
New Jersey
North Carolina
Kentucky
South Carolina
Delaware
New York
Alabama
Illinois
Nevada
Vermont
Massachusetts
Connecticut
Maine
Montana
Kansas
New Mexico
Tennessee
Virginia
Idaho
Florida
Wyoming
(12.3)
(6.5)
(5.8)
(5.3)
(4.6)
(4.4)
(4.1)
(3.6)
(3.3)
(2.9)
(2.6)
(2.5)
(2.1)
(1.8)
(1.5)
(1.2)
(1.0)
(0.9)
(0.8)
(0.7)
(0.7)
(0.6)
(0.4)
(0.1)
0.2
0.3
Iowa
Minnesota
Missouri
Washington
Georgia
California
Maryland
Hawaii
South Dakota
Wisconsin
Oregon
Pennsylvania
Alaska
Louisiana
West Virginia
Utah
Colorado
Texas
Mississippi
Oklahoma
New Hampshire
Michigan
Nebraska
Arkansas
North Dakota
Source: Bureau of Labor Statistics, Current Employment Statistics
0.3
0.4
0.5
0.6
0.6
0.7
1.1
1.3
1.4
1.6
1.7
2.3
2.5
2.7
2.9
2.9
3.3
3.4
3.7
3.8
4.0
4.2
4.6
6.8
7.5
19
Local gov’t employment down slightly for US as a
whole, but declines are small in most states
Local government employment % change, June 2008 to June 2009
United States
Nevada
Rhode Island
Maine
South Carolina
Michigan
California
Florida
Kansas
Arizona
Connecticut
West Virginia
Kentucky
Alabama
Massachusetts
Ohio
Virginia
Oregon
Georgia
Pennsylvania
Iowa
Maryland
Arkansas
New York
Washington
Illinois
(3.6)
(2.5)
(2.4)
(2.1)
(1.6)
(1.5)
(1.1)
(1.0)
(0.9)
(0.8)
(0.7)
(0.6)
(0.5)
(0.5)
(0.4)
(0.4)
(0.3)
(0.1)
(0.1)
(0.0)
0.2
0.3
0.3
0.4
0.8
(0.2)
North Dakota
Indiana
Minnesota
Alaska
Missouri
Hawaii
New Jersey
South Dakota
Louisiana
Nebraska
Vermont
New Mexico
Colorado
Texas
Wisconsin
Mississippi
Wyoming
Delaware
Utah
Idaho
Tennessee
Oklahoma
North Carolina
New Hampshire
Montana
Source: Bureau of Labor Statistics, Current Employment Statistics
0.9
0.9
0.9
1.0
1.1
1.1
1.3
1.5
1.6
1.6
1.7
1.7
1.9
2.0
2.0
2.9
3.0
3.7
4.0
4.9
5.0
5.1
5.6
5.8
10.6
20
Where the cuts in SLG employment have been:
4 states that got an early start
State and local government employment from 2007q4 to 2008q4
in 4 states that had significant declines from December 2007 to December 2008
Year-over-year change in number of state
& local government employees
KY
ME
MI
RI
KY
Year-over-year
percentage change
ME
MI
RI
10 Total, all industries (i.e., all state and local government employment)
(2,623)
(614)
(6,434)
(1,104)
-1.0%
-0.7%
-1.1%
-2.1%
Elementary and secondary schools (NAICS 611110)
All other education (rest of NAICS 61)
Hospitals (NAICS 622)
Nursing and residential care facilities (NAICS 623)
Social assistance (NAICS 624)
Arts, entertainment, and recreation (NAICS 71)
Executive, legislative and general government (NAICS 921)
Courts (NAICS 92211)
Police protection (NAICS 92212)
Legal counsel and prosecution (NAICS 92213)
Correctional institutions (NAICS 92214)
Administration of HR, environmental, and economic programs (NAICS 923, 924, 926)
All other state and local government employment
(223)
316
(263)
n/a
26
(98)
(580)
59
47
(141)
(87)
(1,790)
111
(395)
(190)
31
29
n/a
(114)
(39)
(27)
50
n/a
(31)
(23)
95
(8,015)
2,029
(189)
179
409
(167)
(1,086)
7
54
n/a
38
412
(105)
(287)
(218)
n/a
n/a
(31)
(14)
143
122
(50)
n/a
n/a
(436)
(333)
-0.2%
0.8%
-1.9%
n/a
0.6%
-3.7%
-1.5%
1.3%
1.4%
-5.0%
-1.9%
-10.2%
0.5%
-0.9%
-2.0%
3.5%
2.9%
n/a
-8.1%
-0.4%
-5.2%
1.4%
n/a
-2.3%
-0.3%
0.7%
-3.5%
2.1%
-1.4%
2.7%
5.3%
-4.9%
-0.9%
0.9%
2.0%
n/a
0.3%
1.5%
-0.2%
-1.2%
-4.5%
n/a
n/a
-15.1%
-1.7%
3.2%
20.9%
-1.5%
n/a
n/a
-10.5%
-3.2%
Source: Author's analysis of data from Quarterly Census of Employment and Wages, BLS
21
Furloughs widespread, savings (mostly) moderate
•
•
AZ: Individual departments; e.g., DOT 4.5k employees; Dept Econ Security and Revenue 8.2k+
CA: 238k employees 2x/month since Feb; 3rd day now in the works, $1.3 billion savings, 34 days
over 18 months. Has survived legal challenge so far
•
CO: $16m, 4 days over a year
•
CT: 50,000 employees, $700m, 7 days near holidays over two years in exchange for no layoffs
•
GA: 25k+ employees, agency decisions
•
HI: 15k employees, $688m, 72 days over two years (3x/month). Largest planned furlough in nation
at 13.8% of pay. Union lawsuit has challenged successfully
•
ID: 5k+ employees, $11.6m, 4-10 days in FY 2010; (3.1k employees in Health & Welfare Dept, plus
1.65 employees in Dept Corrections)
•
IA: 1.6k court employees, 5 days in FY 2009
•
MD: 67k employees, $34m, 2 to 5 days in FY 2009
•
MA: 5k employees, $4.5m, 3 to 5 days in FY 2009
•
ME: 7k employees, $10m, 20 days over two years; freezes on merit and longevity pay
•
MI: 37.5k employees, $22m, 6 days in FY 2009
•
NV: $333m, 12 days in FY 2010, about 4.6% of pay. Legislative alternative to 6 percent pay cut
proposed by Gov.
•
NJ: 60k employees, $420m, 2 days in FY 2009, 12 days in FY 2010
•
NC: $65m, 0.5% pay cut in exchange for 10 flex hours
•
OH: $173m, 51k+ employees, 20 days over FY 2009 and FY 2010; also, wage freeze
•
OK: 470 employees, $1.2m, 12 days in FY 2010
•
OR: 2k court employees, 6 days over a year; other furloughs were under consideration
•
SC: 24k employees, $30m+, up to 10 days each in FY 2009 and 2010; agency-by-agency choices
•
UT: 3k university employees, 5 days over spring break in FY 2009; more furloughs likely in public
schools and in state agencies
•
WI: 69k employees, $121m, 16 days (8 in FY 2009, 8 in FY 2010)
Source: Vu, Pauline, “Furloughs cut into state services”, Stateline.org, June 30, 2009, and other news
22
reports.
Cuts in aid to local gov’ts
• In aggregate, states cut or slowed real per-capita
aid in each of last 3 recessions
– declined 1.2% and 2.6% in 1982 and 1983, after the
1980-82 double-dip recessions
– slowed substantially to 0.8% and 1.8% in 1990 and
1991, from faster rates in surrounding years
– declined 1.8% and 0.7% in 2004 and 2005, in lagged
response to the 2001 recession
• Early evidence suggests states are cutting aid to
locals in this recession – e.g., AZ, CA, NY, WI
• Federal stimulus package will mitigate some cuts
23
Why do state-local finances seem
to lag economic recovery?
• Sales taxes & withholding nearly contemporaneous with underlying
economic activity so payment lags for these major sources are NOT
the source of a fiscal lag
• Employment can lag GDP recovery; so can non-wage income
• Capital gains, after a crash, can recover sharply and still be far below
their prior peak. And some (not all) tax payments on capital gains
and other nonwage income can lag the income – e.g., in April-June
2011 taxpayers will settle up on gains earned in 2010
• Pension contributions can be increasing as the economy is
recovering, creating fiscal pressure
• Fiscal lag, in part, is perception and policy choice - spending rarely
declines along with tax revenue, and states patch the gaps. Even
after tax revenue starts growing from its trough, it can take years to
reach its prior peak. So when tax revenue resumes growth it does
not feel like fiscal recovery.
24
Factors influencing revenue take time to reattain pre-recession level, but
spending does not – economic recovery does not feel like fiscal recovery
# of quarters after the GDP trough
until pre-recession level is re-attained
Recession
start-year:
1969
1973
1980
1990
2001
Real GDP
Employment
1
3
2
3
1
6
4
2
8
14
Real wages
5
6
3
4
11
Real proprietors'
Real state and
income, plus
Real
local government
dividends,
consumption of
current
interest, rent
goods
expenditures**
2
9
1
13
13
1
2
8
4
1
1
1
1
1
1
Source: BEA National Income and Product Accounts
Note: All variables deflated using GDP price index
** 2007 is different so far
25
Will stimulus last until taxes recover?
Taxes adjusted for population growth, inflation, and legislative changes
By fiscal year, indexed to approximate start of each fiscal crisis (Year 0)
110
1981
1990
2001
2008 Low-Gap Scenario
2008 High-Gap Scenario
105
100
-3
-2
-1
0
1
2
3
4
5
95
90
85
Sources: Tax revenue (Census Bureau and Rockefeller Institute estimates), Inflation (BEA GDP price index),
Legislative changes (NGA/NASBO Fiscal Survey of States Fall 2008)
26
Stimulus aid: Big, but temporary. Gaps re-emerge
even under optimistic scenario
"Low-Gap" Scenario:
State general revenue minus expenditures with and without federal stimulus
4%
Balance (gap) as % of general expenditures
2%
Without stimulus
With stimulus plan
0%
2005
2006
2007
2008
2009
2010
2011
2012
2013
-2%
-4%
-6%
-8%
State fiscal year
27
Gaps of >$100b annually re-emerge under
“high-gap” assumptions
"High-Gap" Scenario:
State general revenue minus expenditures with and without federal stimulus
4%
Balance (gap) as % of general expenditures
2%
Without stimulus
With stimulus plan
0%
2005
2006
2007
2008
2009
2010
2011
2012
2013
-2%
-4%
-6%
-8%
State fiscal year
28
Concluding comments
• Revenue declines have been widespread and
devastating
• Budget gaps still growing, more actions needed
• Many states (e.g., CA, NC, NY, WI, others) pushing
part of problem into future
• Tax revenue historically recovers sharply but with a
lag
• Stimulus aid is huge, but temporary. It provides
breathing room for states
• Further difficult actions will be required after stimulus
money runs out. FY 2012 will need much more
action
29
Selected references and resources
Elmendorf, Douglas (director of the Congressional Budget Office), Letter to Honorable Nancy Pelosi
with estimated annual budgetary impacts of the conference agreement for H.R. 1, Washington, DC,
February 13, 2009.
Federal Funds Information for States (FFIS), State Policy Reports, February 2009.
Federal Funds Information for States (FFIS), The American Recovery and Reinvestment Act Becomes
Law, Budget Brief 09-04, February 23, 2009.
Government Accountability Office, Letter to the Honorable Max Baucus, Chairman of the Senate
Finance Committee, From Stanley J. Czerwinski and Thomas J. McCool, February 4, 2009.
Government Accountability Office, RECOVERY ACT: As Initial Implementation Unfolds in States and
Localities, Continued Attention to Accountability Issues Is Essential, GAO-09-580, April 2009.
Government Accountability Office, RECOVERY ACT: Initial Results on States' Use of and
Accountability for Transportation Funds, Statement of Katherine Siggerud, Managing Director Physical
Infrastructure Issues, GAO-09-597T, April 29, 2009.
Tomsic, Trinity, ARRA, the Federal Budget, and the States, FFIS, Presentation to the Lincoln Institute
of Land Policy, May 2009.
www.recovery.gov
30
Appendices
– State nonfarm employment trends
– Current fiscal conditions
– State tax revenue trends since
crisis began
– Recessions and different revenue
sources
– Stimulus
31
State nonfarm
employment trends
32
Nonfarm employment by state (1)
33
Nonfarm employment by state (2)
34
Current fiscal conditions
35
Decline accelerated sharply in Jan-Mar 2009
Quarterly State Tax Revenue
By Major Tax, Year-Over-Year Percent Change
PIT
1999 Q1
1999 Q2
1999 Q3
1999 Q4
2000 Q1
2000 Q2
2000 Q3
2000 Q4
2001 Q1
2001 Q2
2001 Q3
2001 Q4
2002 Q1
2002 Q2
2002 Q3
2002 Q4
2003 Q1
2003 Q2
2003 Q3
2003 Q4
2004 Q1
2004 Q2
2004 Q3
2004 Q4
2005 Q1
2005 Q2
2005 Q3
2005 Q4
2006 Q1
2006 Q2
2006 Q3
2006 Q4
2007 Q1
2007 Q2
2007 Q3
2007 Q4
2008 Q1
2008 Q2
2008 Q3
2008 Q4
2009 Q1
CIT
5.8
5.2
6.9
7.3
17.0
21.2
10.0
6.5
4.7
3.7
(0.0)
(2.5)
(14.7)
(22.3)
(3.4)
0.4
(3.3)
(3.1)
5.4
7.6
7.9
15.8
5.8
8.8
13.1
19.7
10.2
6.7
9.3
18.8
6.6
4.4
8.5
8.9
6.5
3.8
5.0
7.4
2.1
(1.2)
(17.5)
Source: U.S. Census Bureau (tax revenue).
(5.4)
5.4
4.3
4.7
11.0
4.2
8.2
(0.5)
(8.4)
(11.0)
(27.2)
(34.0)
(15.7)
(12.3)
7.4
34.7
8.3
5.2
12.6
12.5
5.4
3.9
25.2
23.9
29.8
64.1
24.5
33.4
9.6
1.2
17.5
12.6
14.8
1.7
(1.9)
(14.5)
(1.3)
(7.2)
(15.2)
(22.0)
(18.8)
General Sales
4.9
5.0
6.2
7.2
11.9
7.0
4.8
4.4
1.8
(0.8)
2.3
1.8
(1.4)
0.1
2.4
1.8
2.4
4.6
4.7
3.6
9.1
9.5
7.0
10.7
7.3
9.1
8.3
6.4
7.0
5.2
6.7
4.7
3.1
3.5
(0.9)
4.0
0.6
0.2
4.8
(5.4)
(8.3)
Total
3.8
4.3
6.5
7.7
12.4
11.7
6.8
4.2
2.7
1.2
0.5
(1.1)
(6.1)
(9.4)
1.6
3.4
1.6
2.1
6.3
7.0
8.1
11.2
6.5
9.4
10.6
15.9
10.2
7.9
7.1
10.1
5.9
4.2
5.2
5.4
2.8
3.6
2.6
4.6
3.1
(4.0)
(11.7)
36
April-May declines were widespread and devastating
April-May 2009 State Tax Collections vs. April-May 2008, 44 states
% change
United States
PIT
(33.2)
CIT
(6.5)
Sales
(10.3)
Total
(20.0)
(11.8)
(20.9)
(10.0)
(6.8)
(26.1)
(28.4)
(21.2)
(27.1)
(13.0)
(24.2)
(17.5)
(9.9)
New England
Connecticut
Maine
Massachusetts
New Hampshire
Rhode Island
Vermont
(33.7)
(34.3)
(32.1)
(33.2)
(37.5)
(34.8)
(23.3)
(29.8)
(22.8)
(11.9)
(21.8)
(71.0)
(21.8)
Mid-Atlantic
Delaware
Maryland
New Jersey
New York
Pennsylvania
(36.2)
(41.0)
(19.0)
(33.9)
4.8
(20.6)
(12.3)
(27.8)
(18.1)
(17.4)
(44.1)
(20.3)
(101.3)
(26.0)
(9.6)
(9.1)
(36.7)
(15.8)
Great Lakes
Illinois
Indiana
Michigan
Ohio
Wisconsin
(29.1)
(26.8)
(23.0)
(33.2)
(32.5)
(29.2)
(3.0)
19.9
(13.0)
(1.6)
(40.5)
(46.6)
(9.3)
(12.8)
(2.5)
(13.6)
(8.9)
(5.5)
(15.2)
(15.5)
(16.4)
(5.3)
(19.2)
(19.7)
Plains
Iowa
Kansas
Minnesota
Missouri
Nebraska
North Dakota
South Dakota
(14.7)
(16.9)
(21.1)
(35.6)
(23.4)
(54.0)
(4.0)
11.4
(2.3)
(12.5)
(8.5)
(19.7)
(11.6)
(18.0)
12.1
(28.1)
(15.3)
(57.1)
(13.6)
(3.1)
(10.3)
(14.2)
(11.3)
(10.3)
Southeast
Alabama
Arkansas
Florida
Georgia
Kentucky
Louisiana
Mississippi
North Carolina
South Carolina
Tennessee
Virginia
West Virginia
(25.8)
(24.8)
(14.2)
(21.8)
33.7
38.4
(34.5)
(33.9)
(43.1)
(35.1)
(28.4)
(21.5)
12.0
(37.2)
(15.6)
4.8
0.3
(9.9)
(10.7)
(6.6)
(12.1)
(13.3)
(4.5)
(4.9)
(10.1)
(5.4)
(9.1)
(10.5)
(10.9)
0.5
(14.8)
(11.5)
(5.1)
(14.8)
(17.7)
(8.6)
(21.4)
(10.8)
(15.9)
(31.0)
(12.8)
(16.4)
5.8
Southwest
Arizona
New Mexico
Oklahoma
Texas
(63.9)
(63.9)
(24.0)
(24.0)
(9.9)
(20.5)
17.0
(39.2)
(8.1)
30.0
Rocky Mountain
Colorado
Idaho
Montana
Utah
Wyoming
(26.6)
(32.6)
(31.5)
(25.9)
(15.0)
(38.3)
(29.9)
(36.0)
(9.3)
(58.1)
(12.7)
(13.3)
(14.0)
(23.2)
(28.0)
(21.1)
(21.4)
(18.9)
(24.6)
Far West
Alaska
California
Hawaii
Nevada
Oregon
Washington
(40.6)
(13.2)
(41.1)
(39.3)
26.2
(46.3)
32.9
(63.9)
(36.0)
(59.2)
(18.9)
(18.0)
(20.0)
(11.5)
(43.5)
(43.8)
(6.6)
(4.8)
(10.0)
(15.7)
(13.4)
(12.5)
(15.3)
(32.1)
(89.2)
(28.4)
(25.0)
(15.2)
(36.4)
(9.9)
37
FY 2010 budget gaps exceeded $160b (CBPP)
38
Newly projected gaps for FY 2011 exceed $50b (CBPP)
- And will grow -
39
State tax revenue trends
since crisis began
40
Real per-capita tax revenue since crisis began
Percent change in real per-capita state tax revenue
4 quarters ended 2007q1 to 4 quarters ended 2009q1
United States
Florida
South Carolina
Georgia
Arizona
Virginia
Nevada
Utah
California
Washington
Tennessee
North Carolina
New Hampshire
Idaho
Hawaii
Delaware
Maine
Rhode Island
Vermont
New Mexico
Minnesota
Nebraska
Kentucky
Illinois
Alabama
Colorado
(21.1)
(13.2)
(13.1)
(13.0)
(12.0)
(10.9)
(10.5)
(10.3)
(9.4)
(8.4)
(8.1)
(7.6)
(7.2)
(6.8)
(6.4)
(6.2)
(6.2)
(5.4)
(4.9)
(4.6)
(4.3)
(4.1)
(3.8)
(3.4)
(3.3)
Source: Census Bureau, BEA (GDP price index)
(4.4)
Mississippi
New Jersey
Louisiana
Connecticut
New York
Missouri
Arkansas
Wisconsin
Pennsylvania
Oklahoma
Massachusetts
West Virginia
Kansas
Oregon
Ohio
South Dakota
Michigan
Indiana
Texas
Maryland
Montana
Iowa
Wyoming
North Dakota
Alaska
(3.3)
(3.0)
(2.9)
(2.8)
(2.6)
(2.4)
(2.3)
(2.2)
(2.1)
(1.4)
(1.3)
(1.2)
(0.8)
(0.8)
(0.1)
0.8
1.0
3.6
6.0
8.1
8.2
10.0
11.7
39.5
239.6
41
Real per-capita tax revenue by state (1)
(Caution: Not adjusted for legislative changes)
42
Real per-capita tax revenue by state (2)
(Caution: Not adjusted for legislative changes)
43
Real per-capita tax revenue by state (3)
(Caution: Not adjusted for legislative changes)
44
Real per-capita tax revenue by state (4)
(Caution: Not adjusted for legislative changes)
45
Recessions and
different revenue
sources
46
Income tax reliance
State government income tax as percentage of total taxes, 2006
United States
Oregon
Massachusetts
New York
Virginia
Colorado
Connecticut
Georgia
California
North Carolina
Missouri
Wisconsin
Maryland
Utah
Ohio
New Jersey
Minnesota
Iowa
Nebraska
Idaho
Kansas
Maine
Rhode Island
Montana
Delaware
Oklahoma
71.4
54.1
53.7
52.8
50.0
47.6
47.2
46.0
46.0
44.1
42.8
42.1
41.7
40.2
40.0
39.6
39.4
39.0
38.9
38.3
38.0
37.2
36.2
35.6
35.3
34.6
South Carolina
Alabama
Indiana
Hawaii
Pennsylvania
Illinois
Kentucky
Arkansas
West Virginia
Arizona
Michigan
Louisiana
Vermont
New Mexico
Mississippi
North Dakota
New Hampshire
Tennessee
Alaska
Florida
Nevada
South Dakota
Texas
Washington
Wyoming
35.1
32.4
32.2
31.5
31.1
30.7
29.3
28.7
28.5
27.4
26.3
25.9
22.5
22.0
20.9
17.0
3.9
1.8
-
Source: Census Bureau
47
Despite stock market bounce from lows, annual average for 2009 will be
well below 2008, possibly contributing to further cap gains declines
Calendar-year and monthly stock market values
1,600
2007
1,500
Monthly (first day)
Calendar-year average
2000
1,400
2006
1,200
2005
2001
2008
2004
1,100
1,000
2002
2003
900
2009 YTD
800
700
600
Ja
nM 99
ay
Se 99
p9
Ja 9
nM 00
ay
Se 00
p0
Ja 0
nM 01
ay
Se 01
p0
Ja 1
nM 02
ay
Se 02
p0
Ja 2
nM 03
ay
Se 03
p0
Ja 3
nM 04
ay
Se 04
p0
Ja 4
nM 05
ay
Se 05
p0
Ja 5
nM 06
ay
Se 06
p0
Ja 6
nM 07
ay
Se 07
p0
Ja 7
nM 08
ay
Se 08
p0
Ja 8
nM 09
ay
-0
9
S&P 500 adjusted close
1,300
1999
48
State capital gains
Net capital gains as % of adjusted gross income, 2006
States with broad-based income tax
United States
Idaho
New York
Colorado
Connecticut
Massachusetts
Montana
Vermont
California
Arizona
Hawaii
Illinois
Oregon
Utah
Georgia
Oklahoma
South Carolina
Virginia
Maine
Rhode Island
Delaware
9.1
11.8
11.6
11.3
11.1
10.8
10.6
10.5
10.4
10.3
9.5
9.1
9.0
8.9
8.3
8.0
7.9
7.8
7.7
7.6
7.5
North Carolina
Nebraska
Louisiana
Maryland
New Mexico
Pennsylvania
Alabama
Wisconsin
New Jersey
Minnesota
North Dakota
Kansas
Missouri
Mississippi
Kentucky
Arkansas
Indiana
Iowa
Ohio
Michigan
West Virginia
7.2
7.2
7.2
7.2
7.1
7.0
7.0
7.0
6.9
6.7
6.4
6.3
6.2
5.9
5.8
5.5
5.5
5.5
5.3
5.1
3.7
Source: IRS, Statistics of Income
Note: This is a crude indicator of capital gains importance. Should be coupled with analysis of state-specific
gains taxation rules and importance of income tax to overall revenue.
49
Sales tax reliance
State government sales tax as percentage of total taxes, 2006
United States
Washington
Tennessee
South Dakota
Florida
Nevada
Mississippi
Texas
Hawaii
Arizona
South Carolina
Arkansas
Indiana
Nebraska
Louisiana
Utah
Idaho
New Mexico
Michigan
Georgia
Kansas
Ohio
Rhode Island
Missouri
Wisconsin
Wyoming
61.2
60.6
57.1
55.9
51.4
50.9
49.9
47.9
45.1
41.1
39.5
39.1
35.6
35.5
34.6
34.3
34.1
34.1
34.1
33.9
31.5
31.2
30.5
29.9
29.4
31.9
Iowa
Maine
Pennsylvania
California
Kentucky
Illinois
North Dakota
New Jersey
Alabama
Minnesota
Connecticut
Colorado
West Virginia
North Carolina
Oklahoma
Maryland
Massachusetts
New York
Virginia
Vermont
Alaska
Delaware
Montana
New Hampshire
Oregon
29.4
28.9
28.9
28.9
27.6
27.6
26.4
26.1
26.0
25.6
25.1
24.7
24.7
24.4
23.2
23.1
20.7
19.6
19.0
13.5
-
Source: Census Bureau
50
State-local property tax reliance
State-local property tax as percentage of total taxes, 2006
United States
New Hampshire
New Jersey
Texas
Vermont
Rhode Island
Maine
Connecticut
Michigan
Illinois
Indiana
Wisconsin
Massachusetts
Montana
Florida
South Dakota
Iowa
Nebraska
South Carolina
Wyoming
Kansas
Virginia
Colorado
Oregon
New York
Ohio
Pennsylvania
61.6
43.4
42.9
41.7
40.3
38.1
38.1
37.6
37.5
36.6
36.0
35.3
35.1
34.6
34.2
33.1
32.5
31.8
31.4
31.3
30.7
30.6
29.7
29.5
29.1
29.0
30.0
Georgia
Arizona
Idaho
Washington
Missouri
North Dakota
District of Columbia
Alaska
Nevada
Mississippi
Tennessee
Minnesota
North Carolina
Maryland
California
Utah
West Virginia
Kentucky
Oklahoma
Hawaii
Louisiana
Arkansas
Alabama
Delaware
New Mexico
28.8
27.7
27.5
27.5
27.2
26.8
26.7
26.4
25.7
25.4
23.9
23.7
23.3
23.1
22.7
22.7
18.0
17.9
16.0
15.9
15.7
15.1
15.1
14.7
13.7
Source: Census Bureau
51
Large variation in housing price declines
Percent change in housing values, 2007q1 to 2009q1
United States
Nevada
California
Florida
Arizona
Rhode Island
Maryland
Michigan
New Jersey
District of Columbia
Hawaii
Massachusetts
New Hampshire
Connecticut
Virginia
Minnesota
Oregon
New York
Illinois
Delaware
Washington
Maine
Idaho
Ohio
Wisconsin
New Mexico
Vermont
(28.4)
(25.9)
(22.1)
(18.8)
(10.8)
(9.4)
(7.5)
(7.1)
(6.3)
(6.1)
(6.1)
(5.5)
(5.0)
(4.8)
(4.4)
(3.8)
(3.2)
(2.7)
(2.6)
(2.5)
(0.9)
(0.6)
(0.3)
0.1
0.3
0.6
(3.7)
Utah
Pennsylvania
Missouri
Georgia
Alaska
Nebraska
Indiana
Colorado
Arkansas
West Virginia
Mississippi
Kansas
Iowa
Kentucky
South Carolina
Tennessee
Louisiana
North Carolina
Montana
Alabama
Oklahoma
Wyoming
South Dakota
North Dakota
Texas
Source: Federal Housing Finance Agency (all-transactions index)
0.7
0.7
0.8
1.0
1.3
1.7
2.0
2.2
2.3
2.3
2.5
3.4
3.4
3.4
3.8
3.8
4.2
4.4
4.6
5.3
6.3
6.4
6.8
6.8
6.9
52
Property taxes and housing busts
•
Property value declines do not translate directly into property tax revenue declines. Many intervening
factors
Existing properties
– Lags between changes in market values and changes in assessed values; foreclosed property may be reflected
on property rolls quite quickly
– Imperfections in how assessed values reflect market values; sometimes challenges (informal, formal but nonjudicial, and judicial) are required, and these can take time
– Lags between when official assessments change, and when taxable assessed values change - due to
acquisition-value rules, caps on assessed value changes for individual properties, and phase-in rules
New construction and development
– Cancellation or delays of deals can delay and reduce value of new property placed on assessment rolls
– In some places some new construction is phased into the assessment roll, so delays or cancellation may have
lagged and muted impacts
•
•
Tax rates - can counteract declines in taxable AV, at political price; can be constrained by state and
local limits on levels or increases in rates, levies, revenue, or expenditures
Tax revenue tends to respond to price changes eventually, on average
–
–
•
See graphs below for four illustrative housing busts
Lutz estimated long-run elasticity of property tax revenue to housing prices of about 0.4 with a lag of about 3
years between price changes and tax changes
How this happens is highly idiosyncratic, depending on specific rules and practices in a given
jurisdiction
–
–
In CA, many jurisdictions appear to be reflecting market value changes in assessed values quite rapidly,
increasing stress on local taxing jurisdictions
In NYC, it appears that the declines in market value will be reflected in assessed values quite slowly (at the
same time that some prior increases are still being phased in) and could take 5 or more years before they are
fully phased in
53
After a housing bust, can take 3 or more years
before property taxes decline (IF they do)
Gr and Junct io n, C O M SA ( Ho me values) and M esa C o unt y ( Pr o p er t y t ax)
A ust in cit y, T X
130
160
150
120
140
110
130
120
100
P r oper t y t ax
110
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
Home val ues
90
100
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
P r oper t y t ax
1995
Home val ues
80
90
80
70
70
60
60
50
50
Sour ces: Census B ur eau (Gov't pr oper t y t ax) and Feder al Housi ng Fi nance A gency (M SA home val ue i ndex)
Sour ces: Census B ur eau (Gov't pr oper t y t ax) and Feder al Housi ng Fi nance A gency (M SA home val ue i ndex)
Har t f o r d cit y, C T
W o r cest er cit y, M A
160
140
150
130
140
120
P r oper t y t ax
130
Home val ues
110
120
P r oper t y t ax
100
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
Home val ues
110
90
100
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
80
90
70
80
60
70
60
50
Sour ces: Census B ur eau (Gov't pr oper t y t ax) and Feder al Housi ng Fi nance A gency (M SA home val ue i ndex)
Sour ces: Census B ur eau (Gov't pr oper t y t ax) and Feder al Housi ng Fi nance A gency (M SA home val ue i ndex)
Sources: Census Bureau (taxes – city or county), Federal Housing Finance Agency (Housing price index - MSA).
Caution: Different scales.
54
Huge variation in state & local revenue structures
State government
US Average
Own-source revenue as share of
general revenue
Own-source revenue
Nontax
Total Taxes
Individual income tax
General sales tax
Property tax
Corporate income tax
Other taxes
Min
P25
P75
Max
69.8
52.3
65.6
73.5
79.5
100.0
26.4
73.6
25.5
23.5
1.2
4.9
18.5
100.0
17.4
36.7
10.2
100.0
24.1
66.8
17.1
17.4
3.3
14.5
100.0
33.3
75.9
31.0
26.0
2.0
5.3
22.9
100.0
63.3
82.6
45.7
46.6
26.0
15.6
44.3
Near Min
Near Max
MS, WY, LA
VA, DE, NV
AK, NH, DE
AK, FL, NV…
AK, DE, MT, …
many
NV, TX, WA,…
GA, MA, UT
CA, MN, NV
OR, NY, CA
WA, FL, NV
VT, NH, WA
NH, AK, CA
WY, NV, TX
Local government (aggregated by state)
US Average
Own-source revenue as share of
general revenue
Own-source revenue
Nontax
Total Taxes
Individual income tax
General sales tax
Property tax
Corporate income tax
Other taxes
Min
P25
P75
Max
Near Min
Near Max
61.7
29.8
57.6
67.0
80.9
VT, AR, NM
HI, CO, TX
100.0
36.9
63.1
3.0
7.2
45.3
0.7
7.0
100.0
14.6
42.1
18.3
1.3
100.0
30.1
55.8
36.6
2.9
100.0
44.2
69.9
1.0
12.0
54.2
9.1
100.0
57.9
85.4
25.2
32.8
83.5
5.7
17.4
MS, AL, MN
many
many
AL, DC, AR
many
ME, NH, MT
CT, RI, NH
MD, DC, KY
LA, AR, NM
CT, RI, NH
NY, DC, KY
DC, HI, NV
Source: U.S. Bureau of the Census
55
Local government revenue reliance
Local government revenue sources, 2002 Census of Governments
Local government by type
All local
governments*
Number of gov'ts
General revenue ($ millions)
County
87,525
$
995,856
Municipal
3,034
$
256,684
School
district
19,429
$
285,545
Other (Town /
special
district)
13,506
$
350,793
51,556
$
126,959
Revenue component as percentage of total general revenue
General revenue
100.0%
100.0%
100.0%
100.0%
100.0%
40.0%
38.4%
29.8%
56.9%
31.0%
4.3%
2.9%
5.3%
1.0%
13.1%
35.7%
23.3%
2.6%
9.8%
33.8%
7.5%
3.5%
22.8%
21.9%
6.6%
5.1%
10.1%
54.5%
54.5%
0.0%
0.0%
12.0%
2.2%
1.7%
8.1%
60.0%
61.6%
70.2%
43.1%
69.0%
Taxes
Property taxes
General sales taxes
Individual income taxes
Other taxes
37.1%
27.1%
4.4%
1.7%
4.0%
35.0%
24.2%
6.1%
1.3%
3.4%
42.0%
20.4%
7.5%
4.2%
9.8%
35.6%
34.2%
0.7%
0.3%
0.3%
27.8%
22.9%
2.9%
0.4%
1.5%
Charges, fees, miscellaneous
22.9%
26.6%
28.2%
7.6%
41.3%
Intergovernmental revenue
From federal
From state
Education
General local support
All other IGR from state
Own-source revenue
* Double-counting eliminated
56
Stimulus
57
When will stimulus money be spent?
CBO estimates of federal outlays for selected major provisions of ARRA
primarily affecting state & local governments
Federal fiscal years
2009
Medicaid/State fiscal relief (FMAP-plus)
State Fiscal Stabilization Fund
Highway construction
Other transportation
Education provisions
Clean water & drinking water revolving funds
S&L law enforcement
Total
2010
2011
2012
2013
$
33.9
6.5
2.8
2.2
1.4
0.2
0.4
$
43.9
28.4
6.9
2.5
13.0
1.4
0.8
$
11.8
16.1
5.5
3.3
11.5
1.8
0.6
$
0.1
2.4
4.1
2.9
1.3
1.2
0.4
$
$
47.4
$
96.9
$
50.6
$
12.5
$
(0.0) $
0.3
3.0
3.0
0.0
0.6
0.6
7.5
20152019
2014
$
Total
0.0
2.8
2.7
0.3
-
$
0.3
2.5
3.9
0.3
-
$
90.0
53.6
27.5
20.6
27.3
5.8
2.8
5.8
$
6.9
$ 227.6
Source: Elmendorf, 2009
Note: Program definitions and categorizations here vary slightly from those used
elsewhere in presentation
58