States Report Lower-Than-Expected Tax Revenue

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Monday, May 17, 2010 at 11:00 am

All that hand-wringing over California being the next Greece might not be for nothing. States are starting to report their April tax collections, and several have announced numbers far lower than expected even a few weeks ago, auguring bigger deficits and budget shortfalls for next year. The Wall Street Journal reports that collections are down 26 percent in California, 12 percent in Pennsylvania and 10 percent in Kansas. States are starting to look to the federal government — itself under pressure to reduce deficit spending — to make up the shortfall:

Kansas lawmakers are hoping the federal government will help. After the state’s April revenue missed estimates set just two weeks earlier, the legislature responded by changing the state budget to assume Congress will extend more federal support for Medicaid through the end of the year.

Increased federal spending on Medicaid…was a major component of last year’s stimulus package, and it has helped many states prop up their budgets. But it is uncertain that Congress will approve more such funding.

In some states, governors are responding to the April shortfalls on their own. Missouri’s April tax revenue decreased $13.2 million, or 3.6 percent, from the same month a year ago. State budget director Linda Luebbering ordered agencies to hold back $45 million in appropriated spending because tax collections were so far below projections.

Other states have already taken drastic measures to close budget shortfalls. For instance, in March, Arizona decided to end its state health insurance program for children, eliminating free coverage for 47,000 kids. California might end its welfare-to-work program as well as a number of child-care initiatives. And South Carolina has closed group homes for children and a program to help youths emerging from prison sentences to get jobs.

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