This recession has hit state government finances hard. Just how hard is the subject of The Nelson A. Rockefeller Institute of Government's October State Revenue Report.
"Total state tax collections as well as collections from two major sources—sales tax and personal income—all declined for the third consecutive quarter. Overall state tax collections in the April-June quarter of 2009, as reported by the Census Bureau, declined by 16.6 percent from the same quarter of the previous year. We have compiled historical data from the Census Bureau Web site going back to 1962. Both nominal and inflation adjusted figures indicate that the second quarter of 2009 marked the largest decline in state tax collections at least since 1963."
The chart below, which is a part of the report, highlights how steeply state revenues have declined during the current recession as compared with previous recessions:
The data are the sum of all states. How does the Southeast compare with the overall picture? Not very well. According to the report,
"One way to gain insight into which states have been hurt most by this crisis is to compare current tax revenue to its recent peak — a period that is different in different states. For this analysis, we determine a peak tax revenue year for each state, defined as the year ending between June 2006 and June 2009 period that has the greatest tax revenue, after adjusting for inflation and population growth. States hit hardest by the housing bust, such as Arizona, California, Florida, and Nevada, generally attained peak tax revenue in 2006 and have been heading downhill since then."
The table below lists states in order of how deep the tax revenue decline has been:
Two states in the Sixth Federal Reserve District—Florida and Georgia—are in the top five. Tennessee is 19th on the list. Louisiana, Mississippi, and Alabama are also negative but less so than most other states.
Next week we'll look into what state governments are doing to cope and investigate just how long we can expect the states in the region to remain under fiscal stress.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department