Budget Gaps Open in Fewer States as Tax Collections Rebound, Report Shows

Fewer U.S. states have reported new budget gaps since the start of fiscal 2012 compared with a year earlier, according to the National Conference of State Legislatures, which cited rising tax revenue.

California, Missouri, New York and Washington face combined deficits of $4.4 billion for 2012, down from $26.7 billion confronting 15 states at this time last year, the organization said in a report released today. Revenue is projected to rise 1.9 percent compared with fiscal 2011, the report said.

“Better revenue performance is driving the improvement in state finances,” the Denver-based organization said in the report. “Collections in most states have stabilized or are growing, and the general-revenue outlook for the remainder of the fiscal year reflects confidence in continued modest growth.”

Yet the effects of the recession that officially ended in June 2009 still linger after lawmakers closed collective deficits of $91 billion for 2012 and more than $500 billion in the past four years, the organization said, citing a survey of state legislative fiscal officers. While revenue is increasing, growth has been below budgeted levels for some, such as California, leading to new projected deficits, the group said.

A $3 billion budget gap has opened in the Golden State since the fiscal year began in July, according to the report.

Personal income-tax collections have met or beaten forecasts in 33 states, while sales taxes have done so in 35, according to the report. It said concerns that employment gains will trail expectations and Europe’s debt crisis may also temper growth.

Through October, 11 states were over budget in terms of 2012 spending, compared with 25 at the same point a year earlier, according to the report. In six, Medicaid or other health programs were consuming more resources than planned, compared with 18 in 2011. Medicaid costs, to provide services to the needy, are shared with the federal government.

To contact the reporter on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.