States’ Tax Increases Help Close Budget Gaps
Policy + Politics

States’ Tax Increases Help Close Budget Gaps


After three years of the steepest revenue declines on record, Oregon, Washington and Colorado are optimistic about the upcoming fiscal year. That’s because they expect a greater than 10 percent rise in revenue, thanks in part to tax increases that each imposed. 

According to a new report by the National Conference on State Legislatures, nearly every state expects fiscal year 2011 revenues to exceed fiscal year 2010. This is a relief to cash-strapped states that have to address a collective budget gap of nearly $121 billion. But it still won't be enough to make up for the loss of federal stimulus funds. Most states' fiscal years begin July 1.

Forty states forecast 2011 increases, even though revenue would remain well below pre-recession peak levels. Oregon expects a 12.1 percent increase, while Colorado and Washington expect increases of 10.8 percent and 14 percent, respectively. Some 17 states expect total tax receipts to grow 5 percent or more from 2010 levels. The increase is due to tax increases for both businesses and individuals. Alaska expects revenue to fall by 6 percent due to a decline in oil-related revenues.

So how long before states get back to pre-recession revenue levels? It all depends on the strength of the economy and how accurate these forecasts are, says Carina Eckl, director of fiscal affairs with the National Conference on State Legislatures. The data, based on a survey of state budget officials in the summer of 2010, suggest about one-third expect to return to pre-recession levels by 2013. “All of this is in flux, but what it really shows is that the period of time that states expect to get back to pre-recession levels is really strung out over several years,” Eckl said.