June 4th, 2009
11:49 AM ET
5 years ago

States propose $24 billion in tax hikes

states are poised to pass as much as $24 billion in tax and fee hikes in coming weeks.
states are poised to pass as much as $24 billion in tax and fee hikes in coming weeks.

NEW YORK (CNNMoney.com) – States are poised to pass as much as $24 billion in tax and fee hikes in coming weeks, as they struggle to balance their budgets amid the worst economic downturn since the Great Depression, a report released Thursday found.

The spike blows away the $726 million in recommended increases for fiscal 2009.

At the same time, state budgets are set to shrink for a record second year in a row. The recession has caused tax collections to plummetandthe need for social services to soar. State officials are scrambling to close last-minute budget gaps that opened after April tax revenues came in below already-lowered estimates. States may be forced to tap rainy day funds or impose even more stringent spending cuts to balance their budgets before their fiscal years end on June 30.

Governors' proposed budgets for fiscal year 2010 show a 2.5% decrease in general fund spending, which comes after an estimated 2.2% decline in the current fiscal year,

This is the largest pullback in the survey's 30-year history and the first time state spending would decline for two years in a row, according to
the National Governors Association and the National Association of State Budget Officers. General fund spending, which is not earmarked for specific uses, covers mainly education, Medicaid, corrections, public assistance and transportation.

Some 29 states are recommending tax and fee increases for the coming fiscal year.

California, which is struggling to close a $21.3 billion budget gap, accounts for $11.3 billion of the hike. Illinois makes up another $4.4 billion, while New York is proposing $4 billion in additional levies.

Hikes in personal income taxes account for $8.8 billion, while sales taxes are set to rise $6.5 billion. Higher cigarette taxes would bring in $1.5 billion, while corporate taxes would rise $539 million.

States also are dipping into their rainy day funds to pay the bills. The funds' balances totaled 9.1% of expenditures in fiscal 2008, but have declined to 5.5% in the current year. However, excluding Texas and Alaska, the funds' balances dip to 3.6% of expenditures. A balance of 5% of expenditures is considered a relatively adequate cushion.

Though demand for state services is up, officials are slashing spending on a wide range of government programs.

Some 28 states have proposed cutting spending on higher education and personnel, while 27 want to reduce funding for K-12 education. Another 25 states have proposed cuts to Medicaid and corrections, while 23 are reducing funds for public assistance.

State officials predict tight times through fiscal 2011 and possibly 2012 since state fiscal recovery historically lags a national economic rebound.

They are currently facing an estimated $230 billion in budget gaps between fiscal 2009 and fiscal 2011.


Filed under: CNNMoney.com • Taxes
soundoff (51 Responses)
  1. Proud DHS radical

    And Obama is giving GM another $30 billion dollars to waste. I guess saving UAW votes for the democratic party is more important than helping the states help their citizens.

    June 4, 2009 11:45 am at 11:45 am |
  2. Michael M, Phoenix AZ

    The Arizona schools have given "pink slips" to thousands of teachers state-wide while the State Legislature and the "new" governor Jan Brewer try to figure out whether or not to increase or even stay even with last years school funding. All the while, AZ lacks near or at the bottom of the nations schools.

    June 4, 2009 11:46 am at 11:46 am |
  3. skyhawkdriver

    Unfortunatly the reality is that most state legislaters and governors don't seem to see the burden they are dumping on the taxpayers..in massachusetts where I live the legislature is trying to raise the sales tax from 5 to 6.25 percent..raise the gas tax 19 cents per gallon..reinstate a tax on beer and alcohol and soda as well as starting to tax candy..last year they raised the tax on cigaretts by one dollar..all the while it remains full of corruption..just last week the third in a row speaker of the house was indited on federal corruption charges..meanwhilt the state has the highest unemployment rates in it's history..over 200,000 properties are in foreclosure..and we have an absolutly powerless governor..even though he is also a dimwitocrat as are the both houses of the state legislature..yes indeed we are glad to be a blue state..our new state motto is do we screwem and how..

    June 4, 2009 11:47 am at 11:47 am |
  4. Jon in CA

    California – Illinois – New York – states with HUGE budget deficits.

    Ironic that THOSE states also have in common that each have had decades of democrat control.

    And now – we have Obama & friends in DC who is spending money faster than it can literally be printed.

    Good Bye sweet America!

    June 4, 2009 11:47 am at 11:47 am |
  5. Larry

    At the same time, state budgets are set to shrink for a record second year in a row. The recession has caused tax collections to plummetandthe need for social services to soar.

    Does anyone actually edit these CNN? What a joke. Tell me what "plummetandthe" means.

    June 4, 2009 11:48 am at 11:48 am |
  6. aliousalam

    how did we ever chose bush over Kerry and Gore as president of this great nation?

    Comparing him to President Obama this morning, I was ashamed of the nation we have been and grateful for the nation we are becoming with real leadership at the helm.

    June 4, 2009 11:48 am at 11:48 am |
  7. Enough

    The tax cut for 95% of Americans, you remember, the $13 per week. That will do nothing to offset all the tax increases the states are putting on us because they can't control their spending. The Feds won't be too far behind raising taxes on the middle class. Come on Folks, you didn't really believe things would be different under Obama.

    June 4, 2009 11:57 am at 11:57 am |
  8. David

    Yeah, this is good. Tax us like crazy in this downturn. This country is in trouble. Both parties share in it. The two-party system is a scam.

    June 4, 2009 12:00 pm at 12:00 pm |
  9. Henry Miller

    Raising taxes in a crumbling economy is political suicide for any politician who proposes or supports it. People who are hurting just aren't going to tolerate protecting union prison guards ripping them off for $100k/year or uninsured illegals ripping them off by using hospital emergency rooms to treat their kids' sniffles.

    When you're broke, stop spending money. But the idiot politicians have to be careful about that too–vindictively axing genuinely essential services such as fire departments while saving waste-of-money do-goodery isn't like to be tolerated very well either.

    June 4, 2009 12:01 pm at 12:01 pm |
  10. aliousalam

    How did we ever let bush's presidency happen?

    dare devil? complacency? or just plain stupidity? But I don't think the whole nation could become stupid or that even just those who voted for him had all become stupid to make that choice. I just think we all fell for the republican pitch of the moment.

    Never again.!!!

    June 4, 2009 12:01 pm at 12:01 pm |
  11. Broke in CA

    California has already raised taxes across the board and it is still not enough. We are sick and tired of all their BS cuts. They need to get serious and cut out free school lunch programs and all the benefits to illegals. Instead they threaten school sports and Health coverage for children...............Why? Because they think we will agree to raise taxes if they threaten those. Illegals cost CA billions every year and we are sick and tired of paying for them.

    June 4, 2009 12:01 pm at 12:01 pm |
  12. Chris

    States will continue to try and raise taxes to pay for their budget gaps. Imagine what is going to happen in the next two years with the federal taxes. With proposed health care costing trillions, additional billions to car manufacturers to aid in their bankruptcy. The government wasting 800 billion in stimulus, plus the estimated 4 trillion in deficits that are predicted with this administration’s next two budgets.

    The proposal to eliminate, at the end of 2009, that wonderful little middle class tax cut that amounts to about 25 dollars every two weeks.
    The proposal to implement a value added tax which could reach 25% without eliminating any federal taxes.
    I hope all you Obama supporters have your emergency funds established because in the next two years the middle class is going to get hit hard with taxes and inflation.

    June 4, 2009 12:04 pm at 12:04 pm |
  13. aliousalam

    Helping the states? I thought republicans didn't want gov't interference in their lives?

    The more fed dollars, the more feds have to say about how you spend it.

    Don't go telling me you want my money in the feds coffers and don't want me telling what to do with it.

    Can't have your cake and eat it too.

    I pay the bill, I say what bill I want to pay! It's that simple.

    June 4, 2009 12:05 pm at 12:05 pm |
  14. Don

    Yeah why don't we just print some more money then? Don't worry about working for it. Oh I forgot this country was built on integrity and hard work. Now look where were at.

    June 4, 2009 12:13 pm at 12:13 pm |
  15. Dutch/Bad Newz, VA

    @ Jon in CA

    California's woes began when the governator took office.

    June 4, 2009 12:14 pm at 12:14 pm |
  16. FLP

    aliousalam – You have got to be kidding! This is NOT Bush's fault that the states have spent too much. When will your brain develop and you understand this......Never!

    June 4, 2009 12:15 pm at 12:15 pm |
  17. Eric in VA

    Joe in CA – Don't forget NJ and Michigan in that bunch. Liberals are a destructive force, and these states are sad but important case studies as to how liberalism destroys.

    June 4, 2009 12:23 pm at 12:23 pm |
  18. skyhawkdriver

    Okay..for all the wingnuts who are blaming bush for the states problems..please explain how that makes sense to you??..where in the us constitution does it say the federal government is supposed to bail out states..the problem is the careless spending of the TAXPAYERS money..if you look at the states with the biggest pile of red ink you will figure out that they are blue states..even california where arnold the rino is in charge..the vast majority are led by clueless governors and state legislatures who take the cue from washington..and guess which party is in charge there..billions and trillions of dollars being thrown at programs that don't work and haven't worked since johnson'great society or roosevelts new deal....too many people for too many years living on government money without working a day in their lives..I actually had a dodge dealer call me the other day trying to get me to trade in my ford pickup for a dodge pickup..he said the government had a new incentive program to help with the down payment..I laughed so hard I cried..I think I got a boo-boo

    June 4, 2009 12:26 pm at 12:26 pm |
  19. Fair is Fair

    Yeah... let's raise taxes in the middle of a deep recession. Even the most ardent tax-and-spend liberal knows that practice spells doom.

    June 4, 2009 12:27 pm at 12:27 pm |
  20. florida indep

    This is the result of the cut taxes and spend like there is no tomorrow doctrine of the republicans controling things for the last couple of decades. Tax cuts that favored the rich lead to increased wealth for the rich and next to nothing for anybody else. A basic business concept says your revenues must excede costs to keep your enterprise a going concern. Otherwise you have to borrow or sale part of the business to raise that needed capital. Inadequate and unrealistic planning based on ideology rather that fact has left us in this mess and both the democrats but primarily the republicans are to blame. I dont like paying taxes any more than the next guy, but tax policy has got to change to reflect reality. We need to take a real hard look at how revenues are raised and on what those monies are spent. Otherwise we will keep on mounting debt on future generations and peroids of economic disaster.

    June 4, 2009 12:29 pm at 12:29 pm |
  21. Patrick - Indianapolis

    You know California, Illinois, and New York are home to the 3 largest cities in the country. They have GDP's higher than most countries, as well as the population to back it up. I would imagine that it goes beyond silly to say its because of Democrats. Seriously. Use a little common sense. Furthermore, California is governed by a Republican last time I checked.

    Ultimately, this isn't a party issue, it is a greed issue. The greedy took and took and now the middle class is collapsing. Greed has toppled great societies since the dawn of mankind. We will never learn our lesson.

    June 4, 2009 12:29 pm at 12:29 pm |
  22. Fair is Fair

    @ skyhawkdiver:

    I too am from the People's Republic of MA, and I was going to comment about the woes here. But I cannot possibly add to your comments. Well done!

    June 4, 2009 12:29 pm at 12:29 pm |
  23. B.H.

    This will be the price of neglect and lack of oversight for the last decade.

    This is the result of NO LEADERSHIP from Bush and CO.

    June 4, 2009 12:33 pm at 12:33 pm |
  24. FLP

    Florida indep – You really don't understand politics, do you?? It's a well known fact that Democrats are and have always been, tax and spend on every social program and then some. You think it's a crime for someone to earn a living and keep some of the money they earn, instead of handing it over to the Democrats to give to you. To say it is the Republicans fault is totally insane.

    June 4, 2009 12:36 pm at 12:36 pm |
  25. steve b

    Start by putting a cap on any and all state employee pay or benefit increases. It will make the economic life of those employees difficult, but then the lives of their rest of us in the private sector who created the tax base that feeds their employer is struggling too.

    But then the Unions, again the cycle repeats

    June 4, 2009 12:37 pm at 12:37 pm |
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