States forecast higher tax revenue

Healing economy, jobs raise sales, income taxes

States expect to collect higher tax revenue in the coming budget year that, combined, would top pre-recession levels, according to a survey released Tuesday.

The increase could reduce pressure on states to cut budgets and lay off workers.

A slowly healing job market and modest economic growth have boosted sales and income taxes, which provide nearly three-quarters of state revenue. Corporate income taxes are also growing.

Still, many states continue to struggle with budget shortfalls. And some states, such as California, are seeing greater revenue only after raising taxes to plug holes in their budgets.

Total state tax revenue is forecast to rise 4.1% to $690.3 billion in the 2013 budget year, according to a twice-yearly survey by the National Governors Association and the National Association of State Budget Officers. It’s the third-consecutive year of revenue growth and $10 billion more than the budget year that ended June 2008. The recession began in December 2007.

Total state spending would increase only 2.2% and remain below pre-recession levels, the report says.

“The thing we’re definitely seeing is stability,” said Scott Pattison, executive director of the budget officers’ group. Only eight states were forced to close unexpected midyear budget gaps this year, he said, compared with 39 states two years ago.

Arizona, Ohio and Michigan expect some of the biggest increases in tax revenue next year.

Michigan has already benefited from higher revenue. Last year, the state had its first surplus in a decade. That enabled officials in February to cancel plans for 37,000 state workers to take four days of unpaid leave.

In Ohio, tax revenue is projected to rise to $17.6 billion next year. That’s an 8.6% increase from the current budget year.

Democrats in the state legislature have responded by pushing for more school funding. Republican Gov. John Kasich has downplayed the improved forecast, saying yearto-date tax receipts are only modestly above estimates.

Other states are seeing less improvement. Iowa, Illinois and Arkansas are among those forecasting small increases.