Return to Normalcy Seems like a ‘Mirage’

Posted by The Govistics Team in Blog

Tax collection revenue in states across the country are down, especially in the larger states, including New York, New Jersey, California, Florida and Washington State.

An article published recently by the New York Times titled “Warning by States as Tax Revenues Fail to Rebound” put a spotlight on the issue with a sobering reckoning from the State of Washington’s chief economist, Arun Raha:

“We are in the fragile aftermath of the Great Recession, where a return to normalcy seems like a mirage in the desert — the closer we get to it, the further it moves away.”

Washington State will likely take in $2 billion less than originally projected this fiscal year, and Governor Christine Gregoire has reacted by calling a special legislative session to deliberate additional budget cuts, even after the state slashed $10 billion in spending since the dawn of the current recession.

CGR Govistics often touts its access to municipal and school district budget data, but the database also includes snapshots of the fifty states. Looking at Washington’s revenue trend line over the course of several years is illuminating. See how Washington’s tax collections did move along at a healthy pace up through 2007, when they leveled off:

But drill down further into the “Property Taxes” category (the overall “Taxes” category covers all tax revenue from licenses, sales taxes, income taxes, property and other taxes). Remember the effect that increased foreclosures and high joblessness can have on home ownership:

A precipitous decline in Washington State property tax collections happened not just in 2008, when the Great Recession made its big debut, but between 1999 and 2000, just before the early 2000s recession. It’s important to remember that state budget crunches are not a new issue; the seeds for the monumental problems states are facing today were planted many years ago.

Take a look at some of the other states profiled in the same New York Times article, and note the following:

  • California property tax revenue also took a huge slide prior to the year 2000, and continues to stay well below the inflation benchmark.
  • New York’s total revenue took an approximately $31 billion dip from 2007 to 2008;
  • New Jersey’s property tax collections were relatively erratic through the last decade, diving $1.5 million in 1999 before spiking above the inflation benchmark again, then dipping from about $4 million to $3 million just before the onset of the current recession:
  • And in Florida, where foreclosure “gloom and doom” has become a widely-discussed identifier, property tax collections from 1997 through 2008 take on the appearance of the only ski slope in the Sunshine State:

When big states face big crises – and react with big job/program cuts or big tax hikes –  it can mean big changes in your community. It could mean your local police force shrinks. Or that your child can no longer attend P.E. class at school. Your local library or community center could shut down. Or, you might notice that your trash collection services are being trimmed back.

The words of Washington State’s chief economist – “a return to normalcy seems like a mirage in the desert” – are haunting. Get ready to witness a tough road ahead for school districts, police departments, local libraries, neighborhoods, and everywhere else that is touched by state and local government services.

 

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