Report: State tax revenues decline in worst performance in a decade

Wednesday, December 19th 2001, 12:00 am

By: News On 6

States' tax income began declining sharply in the first quarter of the current budget year, the first such drop in a decade, with the West and the Northeast the hardest hit, a new report found.

The report released Wednesday brought painful news for state budget writers, who have already cut spending to adjust to the recession and are about to start planning for the year ahead. Budget writers were also trying to deal with slowing revenue growth that occurred in fiscal 2000.

With drops in personal and corporate income tax leading the way, states reported collecting 3.1 percent less in revenue from July through September compared to the same period a year ago, according to the survey released by the Nelson A. Rockefeller Institute of Government at the State University of New York in Albany.

In the fiscal year ending June 30, revenue growth had slowed, falling below what state budget writers predicted. The first three months of the new fiscal year went into the red, with revenue no longer growing and actually falling below amounts received last year.

``There's no good news,'' said Nick Jenny, the report's author and a senior policy analyst at the institute. ``There's a fairly big hole that's going to open up in most state budgets.''

The report found:

_Regionally, the West suffered the most, with an 8.3 percent decline in revenue; New England and the Mid-Atlantic regions each saw a 5.8 percent decline. The Southwest saw the only positive growth at 2.7 percent.

_Adjusted for inflation, revenues fell by 5 percent, the largest decline seen since the recession of the early 1990s.

_Nationally, personal income tax revenue declined by 3.4 percent, the worst quarterly performance in more than a decade.

_Corporate income tax declined by 25 percent for the fourth straight quarter of falling revenues.

_Sales taxes showed no growth, after five quarters of weak but slight growth.

Jenny noted that some of the tax revenue may just be delayed, as many states, following Sept. 11, allowed some postponement of tax payments. But he said that would at best explain only part of the reversal.

The report confirmed what many state budget officials have seen over the past few months.

``It's not going well,'' said Ohio Senate President Richard Finan. In his state, the governor recently agreed to dip into rainy-day funds and the states' share of the tobacco settlement to help cover a $1.5 billion budget shortfall.

``I'm still not convinced that we're over the edge,'' said Finan, a Cincinnati Republican. ``I think we're on the edge. A lot depends on what happens now, as to whether things really can turn around.''

The new survey underscores a series of reports in the past two months that tracked the worsening economies for the states. By October, budget cuts were passed or on the table in 36 states.