Tax revenue drop fuels states’ financial crisis

COLUMBUS (AP) — An across-the-board drop in tax collections, coupled with a prolonged recession, has states facing their worst fiscal crisis in decades.

Several states are entering the first weekend of the fiscal year and July Fourth holiday without a budget in place and facing the prospect of government shutdowns and program cuts. California is ready to start issuing IOUs to vendors because the state is out of money.

The sputtering economy has ravaged all forms of tax collections. Taxes ranging from sales to personal income to property are all down, said Brian Sigritz, a staff associate with the National Association of State Budget Officers in Washington, D.C.

New York State’s Rockefeller Institute of Government says last year’s drop in sales tax revenue was the worst in more than 50 years and early data in 2009 suggests the problem has worsened.

The National Association of State Budget Officers says 42 states wrestled with budget deficits this spring, the most since the organization began tracking budgets 30 years ago.

States weathered similar problems in the recessions of the early 1980s, 1990s and earlier this decade. The confluence of so many problems hammering the economy at once make the present situation appear worse.

California Gov. Arnold Schwarzenegger declared a fiscal emergency and ordered state offices closed three days a month to save money as state officials plan to pay bills with IOUs starting Thursday.

Pennsylvania schools still don’t know how much state money they’ll receive and may have to reopen their budgets to add or subtract spending. The state’s budget year began Wednesday with no sign of a deal between lawmakers and Gov. Ed Rendell.

Ohio Gov. Ted Strickland and lawmakers are stymied over a proposal to allow casino-style gambling to raise money. As a result, the state started its budget year with a one-week temporary budget.

That interim spending plan was already putting a strain on some social-service groups Thursday.

The state food pantry agency has only $163,000 available to spend on produce this week, regardless of how much more they could purchase.