Financial District: State and Local Coffers Taking Major Hits
Slumping tax receipts threaten existing programs and future plans.
Scary state tax collection shortfalls may influence the creation some of the machinery of any new reauthorization bill. States facing almost unprecedented income shortages are getting worried that they may be unable to meet matching requirements when looking for federal dollars.
The possibility of an ARRA-style waiver of the matching requirement, or at least some tweaking to provide short-term flexibility, is likely to come up for serious discussion in both state capitals and Washington.
State tax collections for the second quarter of 2009 dropped 16.6 percent, marking the second consecutive quarter in which revenues fell more sharply over the same period of the previous year than during any previous time on record according to the latest quarterly report on state revenue collections issued by the Rockefeller Institute of Government.
All but one state (Vermont) saw total revenue fall. Thirty-six states reported double-digit decreases. Both those numbers were up from the first quarter of this year.
And, according to early signs, more troubling news is likely for the third quarter. What’s more, some predictions suggest it will be 2014 or 2015 before state revenues return to pre-recession levels.
A steeper, slower climb out
What this means of course is that any economic recovery will take its time getting states back to where they were, which in turn means many, perhaps most, states will struggle to come up with matching funds to make full use of federal transportation dollars. With state and local dollars accounting for half, or more, of the total amount spent on roads and bridges – and local revenues as hard hit as state income – future road and bridge construction may face a prolonged, slow climb back to our most recent idea of normalcy.
It is also leading states to consider becoming more innovation in their relationship with Washington, at least in the short term, as a reauthorization bill hovers on the brink of delay after delay, according to one Washington association executive who says a ARRA-style waiving or reworking of matching requirements is one idea that will almost certainly be considered by states lobbying the bill’s writers.
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