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U.S. State Tax Revenue Tops Pre-Recession Level, Study Says

Jan. 26 (Bloomberg) -- U.S. state tax collections rose 6.1 percent from July to September, the seventh straight quarter of growth, and now exceed pre-recession levels, according to a report from the Nelson A. Rockefeller Institute of Government.

The increase was relative to the same period of 2010, the Albany, New York-based group said today. Preliminary figures from 44 states also show revenue growth of 5.2 percent in October and November compared with the year-earlier period, signaling the streak may extend into the fourth quarter, according to the study.

The recovery in revenue, along with Federal Reserve policy of keeping its benchmark interest rate near zero, helped the $3.7 trillion municipal market in 2011 record its biggest yearly rally since at least 1992.

Yields on 20-year general-obligation bonds with an average Moody’s Investors Service rating of Aa2, the third-highest, fell to 3.6 percent in the week ended Jan. 19, according to a Bond Buyer index. That’s the lowest since April 1967, when Lyndon B. Johnson was president.

While state collections have caught up to levels from before the 18-month recession that started in December 2007, revenue is still below the peak, which came several months into the contraction, the institute said. For fiscal 2011, 36 states were still below the high-point, the report said.

Revenue Disparity

“In recent months, state tax revenue has risen significantly while the overall economy has been growing at a relatively slow pace,” Lucy Dadayan, a senior policy analyst at the Rockefeller Institute, wrote in the report. “Such a disparity is not sustainable over time.”

The U.S. unemployment rate fell to 8.5 percent in December, from a peak of 10 percent in October 2009. The rate was 5 percent in December 2007, according to the Bureau of Labor Statistics.

Tax-collection growth in the third quarter was the slowest since the same period of 2010, the report showed. At the end of fiscal 2011, collections were 3.5 percent below their peak, the report said.

To contact the reporter on this story: Brian Chappatta in New York at

To contact the editor responsible for this story: Mark Tannenbaum at

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