June 4th, 2009
11:49 AM ET
9 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. Henry Miller

    "A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy. –Alexander Tytler.

    June 4, 2009 12:38 pm at 12:38 pm |
  2. Eric in VA

    No, B.H., this is the result of years of liberals promising the world to everyone in these states (Arnold is a liberal and a RINO). They promised more than they could possibly ever hope to pay. Their balance sheet are so lopsided it would be funny if it wasn't so serious. Great article in Fortune magazine about the sorry state of NJ recently. I have been saying for some time now that these states are very important case studies in the failures of liberalism.

    June 4, 2009 12:38 pm at 12:38 pm |
  3. JoeCool

    What did anyone expect. The dumbocrats wanted to be in charge and now they're leading us down the tubes. No new ideas from the left wing extremists. Same old tax, tax, tax.

    June 4, 2009 12:39 pm at 12:39 pm |
  4. a little sad

    Red state or blue state, they all are in trouble. Here in AZ, nothing is getting done in the legislature until the budget is passed. There actually is other business that needs to be transacted. Doubtful the budget will pass in time to not have a shot-down on July 1.

    However, to single out CA NY NJ....

    You are alos talking about the states that are net payers into the Fed, as opposed to places like Alaska that get much more back in funds from the fed than they pay in

    June 4, 2009 12:42 pm at 12:42 pm |
  5. Dawn in Pa

    Gee I do know one thing, in Pennsylvania, Eastern and Western Pennsylvania, is 7% and in the middle is 6% sales tax, our taxes has always been high. It is an equal opportunity tax for us all.

    I used to get teed off when I used to wait for construction workers were working on the roads, now with the roads so bad, I would enjoy waiting until the sign says GO.

    June 4, 2009 12:44 pm at 12:44 pm |

    The problem is: Don't ask what you can do for yourself, expect what the government can do for you........

    June 4, 2009 12:48 pm at 12:48 pm |
  7. a little sad

    "FLP June 4th, 2009 12:36 pm ET

    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."


    I realize from your post that FL Indep’s words went over your head, but just to let you know – spouting “talking points” does not demonstrate an understanding of anything, except, possibly, knowledge of how to turn a TV on.

    If you cut taxes while increasing your spending and hiding some of that spending by moving it off the books, you are heading for a financial meltdown. Where we are currently thanks to the Bush administration.

    June 4, 2009 12:51 pm at 12:51 pm |
  8. Obama Victim

    I could never match tha analysis or verbosity of some of the posters..........none the less.................."perhaps, spend less"???

    June 4, 2009 12:53 pm at 12:53 pm |
  9. Glennis

    The federal government has taken away from the states programs that should rightfully belong to the states. In so doing, they have created a monstrous behemoth in Washington that sucks the tax base dry, leaving the states to try to cope with mandates from Congress that further increase the states expenses. The federal government needs to stop its expansion plans, turn programs back over to the states, and begin axing agencies and departments. Instead of taking over corporate America and killing the golden goose, Washington needs to step back and go back to the basics. What we have now is an unwieldy, unworkable, intrusive, inefficient sorry excuse for government.

    June 4, 2009 12:56 pm at 12:56 pm |
  10. Mark

    Stop the taxing of hard working people!

    If our deficit does not start to reduce, I want to see the politicians take pay cuts like the big business CEOs who are to big to fail (isn't this country too big to fail).

    They (legislators) are talking about taxing soda and sugar drinks to pay or health care (is this a tax on the middle class and poor?)

    June 4, 2009 01:07 pm at 1:07 pm |

    To all those blaming this on Bush and Co. answer one question for me... How does the Federal Gov't control the State's budget? Do they tell them what to do and how to spend their money? Not the last time I checked. Now listen, Bush wasn't a fiscal conservative. Socially he was, but fiscally he was just like a liberal. So all of you blaming Bush for the state's problems need to take a look at how the States operate. I'm from NY, where the liberals have controlled the state my entire life. I now live in Wyoming where Republicans have pretty much controlled the state. The big difference between the two is this: NY lets you keep a piece of your paycheck because they think they know how to spend it better than you do, WY lets you keep a large portion of your paycheck because they want you to spend it in their state increasing revenue. Funny how WY seems to be in a much better position that NY. Become fiscally conservative NY, and your problems will be solved.

    June 4, 2009 01:08 pm at 1:08 pm |
  12. Repub in VA

    And Obama is talking about a VAT tax and healthcare tax to compensate for his waste, so we can all just bend over.

    June 4, 2009 01:12 pm at 1:12 pm |
  13. Dan, TX

    Well, republicans wanted low federal taxes, so we will obviously get higher local taxes, why is anyone suprised/

    June 4, 2009 01:35 pm at 1:35 pm |
  14. Michael M, Phoenix AZ

    For those of you complaining of 6 & 7% sales taxes, try up to 11% in some Arizona cities.

    June 4, 2009 01:40 pm at 1:40 pm |
  15. Bob in Pa

    And after the states have robbed us, BO will enact his energy tax and have the IRS right in toe. If you're not worth 500k now, you won't survive the liberals onslaught. There will only be the haves and have-nots left.

    June 4, 2009 01:40 pm at 1:40 pm |
  16. Dan, TX

    This is the expected result of the recession. Did anyone think it was over? This recession is going to last for years. It could still collapse into a great depression.

    We need to cut expense. Bring the troops home now. Is the amount of money we spent in Iraq and Afghanstan really worth it? We'll never know – if we would have done nothing but diplomacy after 9/11 would we have been attacked again? Would more people have died and been wounded than we've lost in these wars? If we had spent that money in our own country, we could have simply paid off the debts of all these states. Osama Bin Laden could not have wished for more disruption to America than our response to 9/11.

    June 4, 2009 01:46 pm at 1:46 pm |
  17. Bill, Bloominton IL

    I am trying to figure out how to blame Bush for this because we certainly cannot blame Obama. He is above blame.

    June 4, 2009 01:48 pm at 1:48 pm |
  18. Republicans are the American Taliban

    How's that No Child Left Behind program working out? Bush implemented that horrible program in Texas when he was governor, and after eight years as a national program we are still amazed at the cost and poor results. Republicans spent eight years lighting fires, and now don't want to pay for the fire department.....cut their budget also....

    June 4, 2009 01:50 pm at 1:50 pm |
  19. Sick -n- Tired

    Yeah keep hitting people up for more money that they don't have that should fix it! MORONS!!!!!!!!

    June 4, 2009 02:06 pm at 2:06 pm |
  20. Hugo

    Wait a minute! Obama promised that he would not raise our taxes! He promised, he said he would not do it! America wants a FAIR TAX in lieu of IRS, not on top of IRS! I want to see Obama start his wealth redistribution and I think he should immediately start with Oprah, Buffet, Turner, Gates and the cast of Hollowood activists that helped him spread his plan or reparation. Just wait sheeple that voted this Administration in, it is working its way downstream to you now and it wont be too much longer and you will be the ones paying and paying and paying!

    How about this plan, GET OUT of the Middle East let Saudi and all those other oil suckers pay for the atomic mess in their own back yard and let Russia and China deal with North Korea, it is in their back yard, not ours! Start spending some tax dollars to get the economy corrected and let all these other Nations deal with their own mess! We fight Drugs in Mexico and then help them grow poppy in Afghanistan, we let illegals in against our laws and then give them legal counsel and your social security monies! Anyone else see the insanity in this, where is logic?

    June 4, 2009 02:17 pm at 2:17 pm |
  21. ddrfey

    Unemployment is up 30% since Obama took office. How's that hope and change working out?

    June 4, 2009 02:35 pm at 2:35 pm |
  22. skyhawkdriver

    @ glennis..it isn't the governments money..it isn't the states money..it is the PEOPLES money..get it!!!!

    June 4, 2009 02:38 pm at 2:38 pm |
  23. Hrm...

    Joe Cool... are you serious?

    Dumbocrats? Kind of humorous moniker, but still... on to something of interest-
    tax, tax, tax, spend, spend, spend...
    That's what governments do. They tax you. To protect you. To serve you. To insure things go the way they should. Tax cuts actually decrease the amount of money we have to do ANYTHING. That includes decreasing the deficit the Republican Adminstration left for us. You have to spend money to make money. We have to spend to get out of an economic crisis. If everyone just hoarded their money, this would go on and on without end. We have to start stimulating spending by putting money OUT there. The construction jobs? Give jobs and create more money flowing into the economy because these companies are now spending their new cash (which was paid for by the stimulus package), which pays someone else, who goes out and buys things with money, and so on and so on- hence the name: stimulus.

    Oh, and remember... Republicans were banging away for this Stimulus to be passed just as much as democrats. McCain voted FOR it as well.

    June 4, 2009 02:47 pm at 2:47 pm |
  24. Donald. Canton, NC

    All levels of government need to say NO to any more tax increases and STOP increasing their role on their citizens.

    IF the people still want these services from their respective governments then they need to come up with a way to pay for them they are delivered - not by increasing debt on future generations.

    If your gov ernment can't afford then it goes - that should apply to all levels of government!!!!!

    The people and politicans needs to have the moral courage to say NO and stick to it. Nothing is free in this country and the government is not the cure-all for everything. People should quit expecting the government to take care of everything from cradle-to-grave - we as a people, need to be more responsible and accountable for our on lives and stations in life - there is not a birth-right or responsibility of governments

    June 4, 2009 02:49 pm at 2:49 pm |
  25. Jon in CA

    @ Dutch BadNews/VA says,

    "California's woes began when the governator took office."

    LOL – yeah .... I guess as a Virginia resident you have intimate knowledge of the California economic mess and the history of the California legislature & govenor's office??

    Dude – buy a clue. Arnold replaced the democrat Gov. Gray Davis – who was incompetent. The democrat machine in CA is so well entrenched and an efficient well-oiled machine... one psuedo-conservative (Arnold) could not stop the madness.

    California is in this hole because of the liberal legislation that lead to a pro-worker, anti-business nanny-state. Coupling the influence of the unions (teachers, prison guards, etc).... California is enjoying the same fate as GM.

    But you good little liberals – keep trying to pin the blame on Arnold, Bush, or some political boogeyman that suits your parisan nature while America spirals into financial disarray.

    June 4, 2009 02:53 pm at 2:53 pm |
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