States Post Billions in Surpluses

[M.D. Holloway]

States Post Billions in Surpluses

Most states are finding extra money in their coffers just as they craft budgets for the coming year. Forty-one states figure to end this fiscal year with a total of $31 billion more than planned.

Ten states are in the enviable position of unexpectedly having an extra $1 billion or more to help balance budgets, cut taxes or splurge on new projects, according to new data to be released April 19 by the National Conference of State Legislatures at its spring meeting in Washington, D.C.


Texas is living up to its motto that everything indeed is bigger in the Lone Star state, even surpluses. Texas is projecting a jaw-dropping $7 billion in money it hadn't expected. At the bottom of the budget heap, Michigan is expecting to run $360 million short — pared back from $900 million — but still necessitating a scramble to balance its budget by Oct. 1.

Overall, states are a bit worried because sales-tax collections are slipping. “We're concerned because sales-tax performance was a leading indicator of fiscal problems the last time we went into an economic downturn,” Warren Deschenaux, director of Maryland's Office of Policy Analysis, said in an NCSL statement. Sales taxes account for about one-third of state budget revenue for the 45 states that charge a tax on purchases.

Last year at this time, states were reporting robust tax collections across the board — for corporate, income and sales, said Arturo Perez, a NCSL fiscal expert. This year 14 states indicate sales tax collections are below their targets.

State lawmakers last year enjoyed their best budget climate in six years, splurging on new projects ranging from a baseball stadium for the Minnesota Twins to a spaceport in New Mexico.

NCSL's report comes as most state legislatures are working on budgets for the next fiscal year, which for all but four states begins July 1. Almost a dozen states already have wrapped up this year's legislative sessions: Idaho, Kentucky, Maryland, New Mexico, South Dakota, Utah, Virginia, West Virginia and Wyoming.

All states, except Vermont, require a balanced budget.

Most of Texas' unexpected revenue came from higher-than-expected collections of sales taxes and oil-production taxes. Texas, which does not have an income tax, gets about half of its states revenue from the sales tax. Its nearly $7 billion surplus will go toward property-tax relief and other budget items for the coming fiscal year, which begins Sept. 1.

But besides upticks in tax collections, some states are showing surpluses because of conservative forecasting when they drew up their budgets.

Florida finds itself with a $2.7 billion surplus and California $1.9 billion, even though both states earlier this year had been looking at $1 billion shortfalls for the coming fiscal year. A laska plans to use its unexpected $1 billion for K-12 education, while Minnesota and New Jersey plan to cut property taxes with their $1 billion. Even Louisiana, still recovering from Hurricane Katrina, has some budget breathing room. It plans to use $771 million for Medicaid, the state-federal insurance program for the poor. Oregon and Washington, which both have two-year budget cycles, also have more than $1 billion in unexpected funds.

Supplanting health care and Medicaid costs as a perennial budget-buster, prisons are a financial problem area for several states this year. Arizona, Connecticut, Maryland, Montana, New Mexico, Oklahoma, Rhode Island and Vermont are facing shortfalls in their prison budgets.

At least nine states plan to stow portions of their unexpected funds in rainy day or other savings accounts, and at least 11 plan to funnel extra dollars to higher education. Transportation projects also are popular. Virginia tapped about one-third of its unexpected revenues ($161 million) for one-time transportation funding.

At least a dozen states are considering tax cuts, NCSL said. Alabama is looking to cut sales and income taxes. New Mexico already has passed an earned income tax credit and North Carolina is considering one. Utah reduced business taxes. Seven states are approaching the end of this year's fiscal year in the black but with no extra cash: Delaware, Illinois, Kansas, Massachusetts, Rhode Island, Tennessee and Wisconsin. Maine's Legislature must address a $34 million budget shortfall, after an emergency spending bill ate into a projected $86.4 million balance.

Free copies of the NCSL survey can be requested by state lawmakers by emailing press-room@ncsl.org . Others can purchase a copy for $30 at www.ncsl.org/bookstore .

Source: Stateline.org.

[CurtEgerer]

I've got a novel idea - return the surplus to its rightful owners: the tax payers!! It'll never happen. The politicians will go on a shopping spree for sure

Of course, we need not worry about surpluses in Michigan ..... the bottom of the heap for 5 years running.

[pwd72s]

They'll spend it...legislators always do. Give 'em a dollar, they will spend it, commit to spending more, then run to the press crying of "shortages" and "Budget crisis!"

[MichiganMat]

Biding my time Wayne, biding my time...

[berettafan]

One of these days i will write up a little article on what Maryland is doing to steal money from employers and business owners, both small and large. It's disgusting and never makes the news. Md. legislators have figured out how to raise taxes without getting called on it.

And it has nothing to do with r/e taxes.

[The Gaijin]

Surpluses? Ha. Look at the long term liabilities. Retiring workers at half pay, lifetime health benifits. Just passing the buck and punting the ball 20 years forward.

[M.D. Holloway]

berettafan - Do tell. I'm interested in what you have to say.

[BGCarrera32]

The data on Minnesota in the graph is inaccurate, it was actually $2B in surplus. Rather than a rebate, our state government is raising taxes.

So let's see if I have this straight:

The DOW crested past 13,000
MN has a $2B surplus
Any good restaurant I go to at 6PM on a Saturday has a 1 1/2 hour wait.

Yup, just like the media and the liberals say, the economy sucks.
Must be Bush's fault.

[berettafan]

why thanks luby, i thought i wasn't going to be asked!

The first area, and the Fed is doing it too, is via employment taxes. In Maryland employers pay unemployment taxes on the first $8,500 in wages for all employees. This rate, when i started working in public accounting 7 yrs ago or so, was typically in the 10ths of a percent. 8 tenths was not unusual. By comparison, Fed unemployment rate is 8 tenths. Well Maryland unemployment rates have been climbing through the roof over the last several years. Many of my clients are now paying rates as high as 8% or more! This is a MASSIVE increase in tax and in my experience (hundreds of payroll clients) these increases run across the board. So a small employer with 10 employees earning at least $8,500 a piece would be paying as much as $6,800 or more vs. as little as $680 five or so years ago. NOBODY talks about this in the news. The state unemployment auditors i have dealt with are incredibly aggressive as well.

The Fed has gotten into the employment tax hike game as well. Max wages FICA was paid on just a decade ago was, IIRC, $65k. Current figure is now $97.5k. Multiply that difference by 12.4%, then take that figure and multiply it by the number of employees you have earning at least $94k and you find a MAJOR increase in FICA tax that NOBODY talks about.

But wait, there's more. Maryland, along with some other states, has opted to 'decouple' from many recent 'incentives' given to us by the IRS. When the IRS said 'you can accelerate depreciation of certain assets into one year up to $104k' Maryland quietly said 'um...no'. So you will now find an adjustment on your Md return for this difference. And oh by the way your CPA now has to keep two different depreciation schedules.

Maryland has also stepped up frequency requirements for payment of withholding taxes. That is to say they want their money sooner. They have moved dates forward on other taxes as well.

It all amounts to a tax hike (even for timing issues like the 179 depreciation decoupling modification) and NOBODY has had to pay the political price for it.

[legion]

Illinois is deep in the red. They just stop paying bills a few months before the end of the year and then pay them on the next fiscal year's budget. Some programs run out of money as soon as a month into the fiscal year. It's a shell game.