A New York state-based public-research group has concluded in a report yet to be publicly released that state revenue collections are making a strong comeback following the serious recession – the worst in half a century – that plagued state budgets from 2000 through about 2003, the Wall Street Journal reported.
The gains – a 9.5% increase, on average, when comparing July 2004 through March 2005 to the same period a year earlier – are largely attributed to increasing corporate profits, rising household income and the booming real-estate market, the Journal reported.
“We are now seeing year-over-year revenue growth” comparable to levels last seen prior to the recession, said Nicholas Jenny, senior policy analyst with the Rockefeller Institute, which is slated to release the report later in June.
The newspaper warned that it’s not clear how long the improved revenues will last, in that a portion of the boost comes from one-time events such as the large dividend payout to Microsoft stockholders and the highly profitable initial public offering of stock in the web search engine Google. Although hiring appears to be on the upswing, some of the increased household income also appears to come in the form of bonuses rather than creation of all-new positions, the newspaper reported.
Although some states are taking in very strong revenues, others – saddled by heavy payments for the federal-state Medicaid health-insurance program for the poor or other lasting financial issues – the remain in a state of budget overrun. The National Conference of State Legislatures told the Journal that 31 states reported some spending overrun within their budgets in February, compared with 23 last November.
In Arizona, New York, Florida and Ohio, revenue projections have been readjusted upward while in California, the degree of deficit projected has improved from the earlier projected $8.6 billion for the current fiscal year to $3.3 billion.
Jenny said if the good revenue news continues, it could translate quickly into a bid in several states to cut taxes. For the time being, he said, most states are using the unexpectedly strong revenue to bridge budgetary gaps, construct roadways, improve pay for teachers and police and replenish rainy-day funds.