Washington State Governor Announces Possible Budget Cuts

Washington State Governor Chris Gregoire announces today that revenues have fallen over the past two months, possibly requiring more budget cuts for the state.

For Immediate Release: August 12, 2010

OLYMPIA – Gov. Chris Gregoire today announced steps to address a potential shortfall in the current state budget and directed agencies to prepare for the expected budget gap in the 2011-13 biennium.

“Thanks to the incredible hard work of Washington state’s delegation, especially Sen. Murray, we dodged a bullet and have avoided across the board cuts for now,” said Gregoire. “But our state budget remains under stress. To be fiscally responsible, we must transform the way we provide services and take action now to prepare for potential shortfalls.”

Due to legislation passed by Congress this week to send emergency state aid to states, including Washington, the need for any drastic cuts to be taken immediately was narrowly averted. In addition, agency and department savings from across all of state government implemented last year has yielded $89 million in savings to the state budget. Over the last three years, the state has cut $5.1 billion in state spending. This has come in the form of service reductions, facility closures and the laying off of thousands of public employees.

Over the last two months however, revenue collections have been $125 million below expected amounts and the state today has an ending fund balance of $72 million for the 2009-11 biennium. If the upcoming September forecast or a later revenue report comes in less than expected, the state could be faced with a shortfall that eliminates the ending fund balance, which would necessitate further action, likely across the board cuts.

The state is also currently projected to face a $3 billion deficit for the next two year budget.

To prepare for the upcoming two-year budget and be ready for any immediate action that needs to be taken to correct the current budget, Gregoire today announced that she would direct state agencies to:

• Prepare reductions of 4-7 percent for the possibility of across the board cuts starting October 1st if the next forecast or revenue receipts are lower than expected.

• Prepare budget reductions for a supplemental budget for the last six months of the current biennium equal to $500 million statewide to be passed in January.

• Draft 2011-2013 budgets to prepare for the expected $3 billion shortfall which will require a 10 percent reduction in the expected general fund budget. {…} (Governors Office)

A 4 to 7% cuts across the board means only one thing, more layoffs. Does this mean Washington D.C. will have to come up with yet another state bailout package?




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Tax Refunds – Some States Will Be Forced To Delay Payments

The economy is doing so good now that some states can’t afford to pay tax refund checks. Yes, that was intended sarcasm.

Residents eager to get their state tax refunds may have a long wait this year: The recession has tied up cash and caused officials in half a dozen states to consider freezing refunds, in one case for as long as five months.

[…] "It’s an indicator of how bad it is," says Scott Pattison, executive director of the National Association of State Budget Officers. "You know things are bad when you have to do that."

New York, hit with a $9 billion deficit, may delay $500 million in refunds to keep the state from running out of cash, says Gov. David Paterson. […]

Hawaii’s Department of Taxation says some residents may not see state income tax refunds until the end of August, The Honolulu Advertiser reported. It was part of a plan by Gov. Linda Lingle to deal with a revenue drop-off by pushing costs into the next fiscal period, which begins in July. […]

[…]The delays come as some states continue to face deep budget holes, even as economists say the nation as a whole has begun recovery. In a recent report, the budget officers group and the National Governors Association said state fiscal conditions "have continued to worsen," and that state revenues can be expected to lag one to three years behind a national recovery from recession.

This fiscal year, the report said, 36 states have cut nearly $56 billion in spending, and 30 states have cut funding to public and higher education. (USAToday)

State and local budgets are suffering greatly.




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Taxes Increase – Tax Revenues Decline By Record $87 Billion

Taxes go up in 33 states in response to declining tax revenues.

States raise taxes Taxes Increase   Tax Revenues Decline By Record $87 Billion The tally for 2009 is in and it is historic. State tax revenues declines by $87 Billion, the steepest decline on record. This decline is attributed to lost jobs, reduced wages, and lower economic activity.

As tax revenues decline some states have responded by eliminating tax exemptions, increasing fees, and broadening tax bases.

Who said that the middle class would not see their taxes increase before the election?

The full report from the Center on Budget and Policy can be read below.

State Tax Changes

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Tax Officials In Rhode Island Begin Telling Business Owners To Close

From the Providence Journal:

State tax officials have put more than 1,200 businesses across the state on notice this week that they are out of business unless they pay their overdue sales taxes immediately.

For most, that action came in the form of a personal visit from the state Division of Taxation, ordering business owners to lock their doors at once.

By Wednesday, a line of people had queued up inside the Department of Administration building on Smith Hill, waiting their turn to plead their case to a state revenue agent. Some were angry. Others frustrated.

“I understand the state needs money, but to put pressure on the small guy or the moderate guy that’s struggling, it’s not going to do any good,” said Mike Suriani, who owns an electrical supply company in South Providence.

[...] “Yes, the rules state that we have a responsibility to pay our bills every quarter. But when your customers come in and they don’t pay you for a month, and then another month, and another month, businesses have no choice [in] the eyes of the state but to close up and get out,” Suriani said.

State officials say they’ve given businesses with sales-tax permits plenty of notice that they’ve fallen behind in making tax payments.

The permits expired on June 30, and the last in a series of letters sent to owners in recent months said they would not be issued new permits without straightening out their tax situation. In the interim, they were told: “You are conducting business without a permit and must cease immediately.”

A handful in line Wednesday said the process wasn’t quite that simple. Desmond Clark, who owns a small video-game store in North Providence, said he spent months trying to negotiate a payment plan with the state that would allow him to keep current on owed taxes, while staying afloat in a tough economy.

“They didn’t want to hear it. They didn’t want any payment plan whatsoever,” said Clark.[...]

[...] The officials would not disclose who received the in-person visits this week, but said they reached every conceivable kind of retail business in Rhode Island, including small mom-and-pop stores, restaurants and bars. [...]

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Income Tax – State Revenues Drop

The next stage of the recession is now taking hold with tax revenues being hit hard at the state level (and local levels). As tax revenues decline then the state governments (and local governments) are forced with either hiking taxes to make up the loss, or they cut services and employees.

A vicious cycle recessions can be…

State income-tax revenue fell 26% in the first four months of 2009 compared to the same period last year, according to a survey of states by the nonprofit Nelson A. Rockefeller Institute of Government.

The report, conducted by the public-policy research arm of the State University of New York, is one of the most up-to-date measures of how deep the recession is digging into Americans’ wallets and, consequently, state coffers.

States are required by law to balance the budget, so lower tax revenues will translate in service cuts, rather than red ink. Already states such as Kansas are slowing the payment of income-tax refunds and delaying payments to local school districts, according to the report.

Withholdings from the first four months of 2009 were down 6.9% from the same period in 2008, signaling that “many people had a very bad start of the year” with lower salaries and wages, says Don Boyd, a senior fellow at the Rockefeller Institute.

The time span notably includes the April 15 deadline for filing taxes, a critical time for states to collect revenues.[...]

The plunge in income-tax revenue means some states may have to revise budget agreements for 2009-2010 and may still face gaping holes in 2011, when federal stimulus money runs out. (source: WSJ)

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