More states worry about revenues

The housing slump impacted revenue in 24 states this year and 18 say they are “concerned” about their revenue outlook, triple the number from last year, a new report released Dec. 10 shows.

The glum assessment from the National Conference of State Legislatures echoes similar concerns about state finances issued last week by the nation’s governors. The governors predicted as many as 20 states will have to patch holes in their budgets in 2008.

“Although early warning signs do not portend immediate bad news, concerns for current year budgets are mounting with even greater concern for some states in fiscal 2009,” NCSL said in its latest “State Budget Update.” The report provides a snapshot of the first quarter of the current fiscal year and looks ahead to the new legislative session. The fiscal year began July 1 for all but four states (Alabama, Michigan, New York and Texas).

The stalled housing market is pinching state revenues in several ways. Arizona, Illinois and Maryland are among at least 13 states that blamed skimpier sales tax returns on the decline of the housing sector. A drop in home sales and prices mean states take a smaller cut in sales tax because most people who buy homes also purchase new appliances and carpeting and spend big money on home-improvements.

Minnesota, New Hampshire and New Jersey are among at least a dozen states that reported seeing declines in their real-estate transfer or recording taxes, according to the NCSL report.

Florida, which is particularly dependent on sales tax revenue since it does not have a state income tax, reported that the housing sector has directly or indirectly affected all major revenue sources. Both Arizona and California told NCSL the dip in the housing sector also affected personal income taxes. And Nevada is looking at an 18 percent drop in real property transfer tax revenue.

Apart from the housing market, NCSL found that 19 states’ overall sales tax collections are failing to keep pace with what forecasters had projected. And seven are reporting gaps in their budget: Arizona, California, Illinois, Maine, Nevada, New York and Virginia.

Some states are finding holes in certain parts of their budgets. Arizona and Maryland are exceeding spending levels for Medicaid, the federal-state venture that provides health insurance to the poor. Corrections are over budget in Connecticut, Maryland, Oklahoma and Virginia while Connecticut, Kansas and Minnesota are seeing extra education costs, NCSL said.

Free copies of the NCSL survey can be requested by state lawmakers and credentialed media by emailing [email protected] . Others can purchase a copy for $30 at www.ncsl.org/bookstore .