State Revenues Reach Record High After Recession’s Decline

Published in Stateline, April 11, 2013

State tax revenue reached record highs last fiscal year, just years removed from the depths of the Great Recession, which ravaged state budgets and drove down revenues across the board in many states.

States collected nearly $800 billion in the 2012 fiscal year, according to Census data released Thursday. The dollar figure is not adjusted for inflation, but nonetheless shows a drastic jump in collections from 2010 when states collected just $703 billion, the lowest level since 2005.

Several individual states saw significant jumps. Illinois, for example, saw income tax collections increase nearly 40 percent. Hawaii saw a nearly 24 percent increase. Oregon and North Dakota received 20 percent more revenue from motor fuel taxes. Other sizable increases were in large part because of natural resource revenue. North Dakota, for example, saw a 47 percent increase and Alaska, a 27 percent increase overall.

Nearly every state reported a revenue increase in 2012 compared to the previous year. Eight states saw revenue increases of greater than 10 percent last year when compared to 2011.

California’s collections declined, something attributed to the expiration of a temporary sales tax rate increase. And Wisconsin saw a decrease in both its sales and individual income tax revenues, the only state in the Census data to report a decline in both of those two crucial categories that comprise the most state revenues. North Carolina also saw a nearly 10 percent decline in sales tax receipts compared to 2011, and New Jersey saw a small dip there as well. New Hampshire income tax revenue declined 2.3 percent compared to the previous year.

As Stateline previously reported, many experts were optimistic that this would be the year states recovered from the downturn, and indeed many have seen budgets return to the black after years of red ink dominating budget sessions around the country.

But the depths of the recession — and the corresponding revenue loss — still continue to reverberate in the revenue figures. States collected $794.6 billion last year, according to the Census data, which is the highest level ever recorded. But before the Great Recession, states were near a similar level: In 2008, they collected $781.7 billion. That means states have made up much of the ground lost in recent years, but also shows how much ground they lost during the recent economic downturn.

Still, the collections are seen as a sign of continuing improvement in many states, not just in terms of their budgets and tax collections, but also their economies. State tax revenue and economic conditions are inextricably linked, which is why many states suffered deep deficits during the recession.

“The latest data show that state tax revenue is continuing to recover, albeit slowly, from the depth of the recession,” Donald Boyd, a senior fellow at the Nelson A. Rockefeller Institute of Government at the State University of New York in Albany, said in a statement accompanying the data.

The increasing revenues in certain sectors show the improving economic picture. Individual income tax revenue increased more than 8 percent in 2012 compared to 2011, and sales tax revenue increased nearly 3 percent.

Revenue from harvesting natural resources also continues to increase: States collections in this section jumped 29 percent over the previous year. From 2010 to 2011, too, those resource revenues increased nearly 30 percent, making natural resources a significant and ever-increasing portion of state’s tax picture.