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Wednesday, October 22, 2014
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State and Local Finance

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Growing Volatility in State Tax Revenue Is Driving Forecasting Errors


According to a new technical report released by the Nelson A. Rockefeller Institute of Government, increases in state revenue forecasting errors during the recent recession were driven by increases in revenue volatility. The report discusses how revenue forecasting errors have changed in recent years and examines the relationship between revenue forecasting accuracy and (1) tax revenue volatility, (2) timing and frequency of forecasts, and (3) forecasting institutions and processes.
Donald J. Boyd and Lucy Dadayan, September 30, 2014

“April Surprises” Left Many States with Bad News


Preliminary data for the second quarter of 2014 indicate that state personal income tax collections declined by 7.1 percent. This is the second quarter in a row that states reported declines in personal income tax collections. The declines were much anticipated and were driven by the temporary bubble in income tax collections, mostly attributable to the so-called federal “fiscal cliff.” However, we believe personal income tax collections should resume growth in the second half of 2014.
Lucy Dadayan and Donald J. Boyd, September 17, 2014

After Four Years of Uninterrupted Growth, States Reported Declines in Tax Collections


State tax collections showed a decline of 0.3 percent in the first quarter of 2014, which follows four years of uninterrupted growth. The declines are neither surprising nor a sign of a slowing economy, but more due to the impact of the fiscal cliff, which led taxpayers to shift income from tax year 2013 to tax year 2012 to minimize federal tax liability. Early figures indicate further declines in the second quarter of 2014. However, state tax collections will likely resume the growth in the second half of 2014.
Lucy Dadayan and Donald J. Boyd, August 14, 2014

April “Surprises” More Surprising Than Expected


Tax returns on 2013 income that were filed in April show large and widespread declines, mostly driven by behavior of taxpayers, who shifted income from tax year 2013 to tax year 2012 to minimize federal tax liability. While many forecasters expected declines in capital gains in 2013, still it was extremely hard to forecast the magnitude of the decline, leaving many states with large shortfalls.
Lucy Dadayan and Donald J. Boyd, June 12, 2014

How Surprising Will April Surprises Be?


With the preliminary data showing declines in personal income tax collections in the first quarter of 2014, it is likely that the “April surprises” will be rather disappointing for many states. However, the “April surprises” should not be surprising. We had cautioned throughout the year that the temporary bubble in income tax collections, driven by taxpayer responses to the so-called “fiscal cliff,” would be short-lived and would burst.
Lucy Dadayan and Donald J. Boyd, May 6, 2014

Bad News, Worse News for State Tax Collections


The fourth quarter of 2013 brought bad news for many states as personal income tax and overall tax collections softened significantly. In the fourth quarter of 2013, states reported 0.4 percent growth in income tax collections, down from the 10.9 percent growth of a year ago. It seems that even worse news is on the horizon for many states: early figures for the first quarter of 2014 indicate possible declines in income tax collections. We believe some states anticipated this slowing and have reflected it in their budgets, but others may face unpleasant surprises. The recent slowdown makes the April tax filing season all the more important, and uncertain.
Lucy Dadayan and Donald J. Boyd, April 29, 2014

State Tax Revenues Slow in Fourth Quarter


Tax data for the October-December quarter of 2013 show that personal income tax (PIT) growth slowed to 1 percent, down from 5.3 percent in the third quarter, and down from an average of 15.9 percent in the three quarters before that. The growth in personal income tax collections will likely be much softer in the first half of 2014. Sales tax revenues for the fourth quarter have been resilient, suggesting that the income tax weakening may be driven more by the depressing effects of temporary factors. However, in most states, the overall trend in tax collections for fiscal 2014 is positive.
Lucy Dadayan and Donald J. Boyd, March 11, 2014

Strengthening the Security of Public Sector Defined Benefit Plans


The Rockefeller Institute, in cooperation with the State Budget Crisis Task Force, released a new report on the crisis of underfunding of public sector defined benefit plans at the National Press Club. This is the first in a series of Blinken Reports, annual analyses of key fiscal issues affecting state and local governments.
Donald J. Boyd and Peter J. Kiernan, January 2014

December Figures Reveal Weak Growth in Private Jobs and Declines in Government Jobs


The new employment data from the U.S. Bureau of Labor Statistics released on January 10th showed weak growth in private sector employment in the month of December 2013, and declines in state and local government jobs. The longer-term trends indicate that both the private sector and state and local government employment are still below levels reported in December 2007, the first month of the Great Recession.
Lucy Dadayan and Donald J. Boyd, January 15, 2014

Growth in State Tax Revenues Softened in Third Quarter


According to the new Special State Revenue Report, the growth in state tax revenues softened significantly in the third quarter of 2013. However, such slowdown is not a sign of warning, but more an indication that the impact of federal tax changes on state tax revenues had faded away and states are back to a slower revenue growth trend.
Lucy Dadayan and Donald J. Boyd, December 19, 2013

Revenues Likely Nearing the End of Their Robust Growth Phase


According to the new State Revenue Report, at the end of Fiscal 2013 inflation-adjusted revenue collections surpasses the peak levels recorded in fiscal 2008. While most states reported strong revenue growth in the first and second quarters of 2013, early figures indicate that the growth has softened significantly since then.
Lucy Dadayan and Donald J. Boyd, December 9, 2013

Temporary “Bubble” in Income Tax Receipts


According to the new Data Alert, the growth in income tax revenue collections in the second quarter of 2013 was the strongest since the start of the Great Recession. However, the “bubble” in income tax receipts most definitely would be short-lived, and in fact should lead to slower growth later in the year.
Lucy Dadayan and Donald J. Boyd, September 2013

Rockefeller Institute and TIAA-CREF Release National Report on Pension Reform


The Nelson A. Rockefeller Institute of Government and national financial services corporation TIAA-CREF today released a joint report on pension reform, an issue that is increasingly dominating consideration of the financial strength of the public sector. Highlighted in the document were evolving workforce demographics and long-term budget pressures. The information presented in the document resulted from a major convening of state and local officials, union leaders and researchers from across the nation, held in 2012.
Thomas L. Gais and Paul J. Yakoboski, June 2013

Strong Tax Revenue Growth Heightens State Fiscal Uncertainty


Despite the strong growth in overall tax collections in the fourth quarter of 2012, there is no light at the end of the tunnel. The strong growth in personal income tax collections and, particularly, in estimated payments is a strong indicator that some income was accelerated into tax year 2012. This would contribute to the uncertainties in making accurate projections of the personal income taxes in the coming quarters.
Lucy Dadayan and Donald J. Boyd, April 2013

State Tax Revenues Continue Slow Rebound


States reported another quarter of growth in tax collections in the third quarter of 2012. Income tax revenue growth would likely be artificially accelerated in the coming quarters, driven by the federal actions to avert the fiscal cliff.
Lucy Dadayan and Donald J. Boyd, February 2013

Big Cuts in State and Local Government Jobs


Employment data from the U.S. Bureau of Labor Statistics show unprecedented cuts in state and local government jobs — five years after the start of the Great Recession in December 2007.
Lucy Dadayan and Donald J. Boyd, January 2013

States Report Slow Tax Growth through Mid-2012


New data show states’ tax collections grew for the 10th straight quarter through mid-2012. However, growth rates in state tax revenues have slowed, and state revenues are still lower in nominal and real terms than they were in 2008.
Lucy Dadayan and Donald J. Boyd, October 25, 2012

Tax Revenues Continue to Grow in Early 2012


States’ tax collections grew for the ninth straight quarter in the first three months of 2012. Overall state tax revenues rose above pre-recession levels, as well as above peak levels that came several months into the Great Recession. Yet fiscal challenges remain. Twelve states reported tax revenue declines in the first quarter, and local taxes fell.
Lucy Dadayan, August 2, 2012

Changes in the Midwest: Recession, Recovery, and Regional Realignments


The Great Recession hit all regions of the country hard, but the experience of the Midwest has been more complicated than other regions, Thomas Gais told the Fiscal Leaders' Roundtable at the 14th Annual Midwestern Legislative Conference of The Council of State Governments. After difficult years before the recession, the Midwest, like the Northeast, has seen a faster recovery than most other regions. Yet the need for public services may be growing disproportionately in the Midwest, as seen in indicators like a lack of health insurance and increased numbers of children in poverty. Paying for more services may be especially challenging to state and local governments in the Midwest, as there has been little growth in revenues. The situation raises questions about whether economic recovery can be sustained in the region without greater public support for infrastructure and education to boost growth.
Thomas L. Gais, July 16, 2012

The Impact of the Great Recession on Local Property Taxes


Local governments and school districts across the country are facing a serious fiscal crunch accelerated by weakness in property tax collections. Local property taxes dipped in the first quarter of 2012, following two quarters of growth in nominal terms, according to this report. This marked the sixth consecutive quarterly decline when collections are adjusted for inflation.
Lucy Dadayan, with the assistance of Brian T. Stenson and Donald J. Boyd, July 16, 2012

Federal, State & Local Education Finances


Financing for K-12 education is strained in several ways, as noted in this slide presentation. Property tax revenues are weakening, making the local tax less of a cushion against reduced state assistance. State revenues are volatile and less predictable than local taxes have traditionally been, and resources for education compete with other needs, such as health care. And the population of schoolchildren is increasing in states with lower fiscal capacities, smaller state budgets and harder-hit economies. Higher education spending, on the other hand, is growing — not through government appropriations but through greater reliance on tuition payments and is thus impacted by many factors, including federal loans and grants, interest rates, personal income and unemployment. As state differences in K-12 financing grow and higher education funding becomes more privatized, federal funding and policies may become more important. Yet federal funding for all levels of education is vulnerable — to the possibility of political inaction and automatic spending cuts, for instance.
Thomas Gais and Lucy Dadayan, May 22, 2012

Tax Revenues Surpass Previous Peak But Growth Softens Once Again


States’ tax collections grew for the eighth straight quarter at the end of 2011, for the first time topping peak revenue levels seen at the beginning of the Great Recession, according to Rockefeller Institute research and Census Bureau data. Growth appears to be softening, however, and local governments are not faring as well.
Lucy Dadayan, April 19, 2012

States Report Strong Tax Revenues in Fiscal 2011


States saw increased revenues in the fiscal year that ended in June 2011 compared to the previous year, with an overall rise of 8.9 percent in tax collections, according to recently released Census Bureau data. Tax collections still have a long way to go, however, before they recover from the deep declines caused by the Great Recession, this Institute analysis shows.
Lucy Dadayan, April 13, 2012

State Tax Revenues Softened in the Fourth Quarter of 2011


Tax revenues to states continued rising in the fourth quarter of 2011, but at a noticeably slower pace than earlier in the year, according to new Institute data. Collections rose 2.7 percent nationwide, the eighth straight quarter of growth since state revenues began to recover from the damage inflicted by the Great Recession.
Lucy Dadayan, March 19, 2012

The Impact of the Great Recession on the Property Tax in New York


Sharp declines in the number of home sales have limited local governments’ ability to establish accurate property assessments, at the same time that declining values have reduced local tax bases, a new Rockefeller Institute paper finds. This has significant implications for the success of New York’s new property tax cap.
James R. Follain, March 2012

State & Local Government Jobs Continue to Decline in Most States


While the private sector is reporting employment gains, state and local governments continued to cut jobs over the last year. State governments had 76,000 fewer jobs in January 2012 than a year ago, while local governments had 163,000 fewer. The decline in private sector employment, however, remains nearly twice as large as that for state and local governments combined.
Lucy Dadayan, February 17, 2012

Tax Revenue Keeps Rising, But Growth Again Ticks Downward


States’ tax collections grew for a seventh straight quarter and are now topping pre-recession levels, though they remain below peak levels seen after the recession's start, according to this Institute report. Looking forward, the rate of revenue growth may slow in light of broad economic trends. New to this quarterly report is an analysis of states’ fiscal positions at the end of fiscal year 2011.
Lucy Dadayan, January 26, 2012

Giving and Getting: Regional Distribution of Revenue and Spending
in the New York State Budget, Fiscal Year 2009-10


Downstate gives more to the state in taxes and revenues than it gets back in expenditures for services and other assistance. Upstate, on the other hand, gets more than it gives, according to this report , which analyzes the regional distribution of revenues collected and dollars spent within the New York State budget. The report examines actual receipts and expenditures for the 2009-10 fiscal year. The study considered "state funds" only, excluding federal assistance and state expenditures supported by such aid.
December 20, 2011

States Post Another Strong Quarter in Tax Collections


Preliminary data for the July-September quarter of 2011 show growth in overall state tax collections, as well as for personal income tax and sales tax revenue, for the seventh consecutive quarter. Collections increased by 7.3 percent in the third quarter of 2011 compared to the same quarter of 2010. While still strong, revenue growth was more moderate than in the previous three quarters.
Lucy Dadayan, December 8, 2011

State Revenues in an Era of Fundamental Change


While states' revenues are now growing, challenges remain, especially in light of an outlook for slow economic growth, Deputy Director Robert Ward told a conference of the Lincoln Institute of Land Policy and New England Public Policy Center of the Federal Reserve Bank of Boston. His presentation reviewed recent fiscal trends for states and localities, and pointed to some choices elected leaders may need to consider in “an era of fundamental change” for public finance.
Robert B. Ward, December 2, 2011

PIT, Overall Tax Revenues Show Strong Growth in Second Quarter


State tax revenues grew again in the second quarter of 2011 — the end of the fiscal year for 46 states — marking six straight quarters of year-over-year growth and the strongest annual gains since 2005, according to this Institute report. State collections from personal income taxes took a dramatic jump — rising more than 16 percent — in the April-June quarter, compared to the same period of 2010. But tax collections for local governments have headed in the opposite direction.
Lucy Dadayan and Robert B. Ward, October 26, 2011

The Great Recession and Regional Realignments


Economic conditions during the Great Recession have exacerbated longer term trends, hitting Southern and Western states particularly hard, Institute Director Thomas Gais told the National Federation of Municipal Analysts at a conference in Austin, Texas. As this slide presentation shows, those regions have also experienced the greatest population growth over the last decade. But the added population has included both employed individuals and needy ones — poor children, the elderly and uninsured people. These are also states with smaller governments and political cultures that have inhibited tax revenue growth. And Southern and Western states have been particularly dependent on federal assistance, which is being cut. So in addition to the pension liability issues hitting historically large-government states in the Northeast and Midwest, states in the Mountain West and South may be facing increased gaps between needs and resources, straining their ability to deal with health and poverty-related issues.
Thomas L. Gais, October 20, 2011

Cracks in the Crystal Ball: Errors in State Revenue Estimates


Errors in states' revenue estimates have worsened during the fiscal crises following the last two recessions, in large part because of the rising importance of capital gains and other volatile sources of income, Institute Deputy Director Robert Ward told the Federation of Tax Administrators' Revenue Estimation and Tax Research Conference. Citing the Institute's March 2011 report on revenue estimates, Ward suggested policymakers consider establishing stronger reserves and limiting reliance on volatile elements of their tax systems.
Robert B. Ward, October 19, 2011

Strong, Broad Growth in State Tax Revenues Continued
in the Second Quarter of 2011


State tax revenues showed strong growth in the second quarter of 2011, with an 11.4 percent year-over-year increase in total collections, preliminary data show. Tax collections have been rising for six straight quarters, but remain below peak levels.
Lucy Dadayan, September 1, 2011

The Surprise Economy: Why Has New York Been Outperforming the Nation?


New York State’s economic performance has lagged the nation’s for decades. But here's a surprising fact: Employment trends in the Empire State beat the national average for four straight years before, during and after the Great Recession. Two big questions: Why? And, what does this suggest for economic-development policy in New York?
Robert B. Ward, August 31, 2011

State and Local Government Employment Shows Broad, Continuing Declines


While the private sector has added a modest number of jobs over the last 17 months, state and local governments have shed positions for 29 months now, according to data released July 22. The decline in education jobs — which account for the largest number of local government positions — is far greater than in any recent recession dating back to the 1970s.
Lucy Dadayan and Robert B. Ward, July 22, 2011

Robust Revenue Gains Continue in First Quarter and Early Second Quarter


States’ tax revenues grew by 9.3 percent in the first quarter of 2011, marking the fifth straight quarter of growth, according to this Institute report. Preliminary data indicate growing revenue strength through the second quarter, although such robust gains are not expected to last. Local tax revenues declined for the second straight quarter, due primarily to weak property tax collections.
Lucy Dadayan, July 2011

Back in the Black: States' Gambling Revenues Rose in 2010

State and local governments' revenues from gambling rose 2 percent in fiscal year 2010 compared to the previous year, following an unprecedented dip, according to this Institute report. Nonetheless, total revenues from gambling remained lower than in fiscal year 2008. Pennsylvania accounted for nearly half the nationwide growth in 2010.
Lucy Dadayan and Robert B. Ward, June 23, 2011

States Report Strong Growth in Tax Revenues in the First Quarter of 2011


Preliminary tax collection data for the January-March quarter of 2011 show strong growth in overall state tax collections as well as for personal income tax and sales tax revenue, according to this Data Alert. However, tax revenue collections are still below peak levels. The Rockefeller Institute's compilation of data from 47 early reporting states shows collections from major tax sources increased by 9.1 percent in nominal terms in the first quarter of 2011 compared to the same quarter of 2010. That represented the third consecutive quarter of increasing strength in revenues. Tax collections now have been rising for five straight quarters, following five quarters of declines, but were still 3.1 percent lower in early 2011 than in the same period three years ago.
Lucy Dadayan and Donald Boyd, May 24, 2011

Tax Revenues Finished 2010 Strong; Growth Continues in Early 2011


States’ tax revenues finished 2010 strong, with 7.8 percent growth in the fourth quarter and solid gains continuing in early 2011, this Institute report shows. Tax collections by local governments, however, declined by 2.3 percent in the fourth quarter of 2010, driven mostly by declines in property tax collections.
Lucy Dadayan and Donald J. Boyd, April 19, 2011

State & Local Financial Update


It will be a long road to fiscal recovery for the states after the recent recession, which was far worse than past recessions, Senior Fellow Donald Boyd told the Annual Meeting of the Government Investment Officers Association. Fiscal decisions made — including the use of temprorary tax revenue and federal stimulus funds — soften the blow while stretching out the duration of the crisis. Longer term pressures loom, including increasing costs for pensions, retiree health care and Medicaid, along with cuts in the federal budget.
Donald J. Boyd, March 18, 2011

Errors in State Revenue Estimates Growing


States have been making more serious errors in estimating their revenues during tough economic times, according to this report by the Pew Center on the States and the Rockefeller Institute. Driven largely by increasing volatility in state revenue systems, this trend has major implications for officials who set budgets for programs and services while grappling with severe fiscal shortfalls.
The Pew Center on the States and the Rockefeller Institute of Government, March 1, 2011

State Tax Revenues Gained New Strength in Fourth Quarter


After the deepest recession since the Great Depression, most states are on the gradual road to tax revenue recovery, according to this Rockefeller Institute report. Final third-quarter and early fourth-quarter data signal an upward trend. Yet several indicators suggest broad state fiscal conditions remain fragile.
Lucy Dadayan and Donald J. Boyd, February 2011

Stop us beforewe tax again


In this presentation to the Legislative Conference of the New York Association of Counties, Senior Fellow Donald Boyd analyzed the effects of tax caps. Tax caps can be effective at reducing property taxes and government expenditures in areas like education, he concluded, but not the overall size of the public sector.
Donald J. Boyd, February 8, 2011

Economic Perspectives on State & Local Taxes


Senior Fellow Donald Boyd made this presentation to the Lincoln Institute of Land Policy and the New England Public Policy Center of the Federal Reserve Bank of Boston. While states' revenue crisis is easing, the fiscal crisis continues, he explained, as the recent recession was worse than those in previous decades.
Donald J. Boyd, January 21, 2011