Historic Decline in Oil and Coal Prices Hammers State Tax Revenue Oil has dropped from an average of $99 per barrel in 2014 to below $30 this January, the lowest level in the last 12 years. Coal prices have also fallen significantly. While lower prices are good for consumers, they are particularly bad for the economies and finances of oil- and mineral-dependent states: Alaska, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, West Virginia, and Wyoming. Total tax revenues for these states have declined by 3.2 percent, while the remaining 42 states have reported 6.5 percent growth in total tax revenues. These steep commodity price declines are leading to cuts in production and employment, weakening mineral-state economies and likely leading to slower growth in state revenue from other tax sources.
Lucy Dadayan and Donald J. Boyd, February 1, 2016
State and Local Government Unfunded Pension Liabilities Rise by $268 billion in the Third Quarter of 2015
Investment shortfalls in the July-September quarter of 2015 caused unfunded state and local government pension liabilities to increase by $268 billion, reaching $1.7 trillion, according to Federal Reserve Board data examined in a By the Numbers Brief of the Rockefeller Institute. The increase was a full 1.4 percent of the nation’s gross domestic product (GDP), bringing unfunded liabilities to 9.5 percent of GDP — undoing about one and a half years of improvement. In the last 25 years, unfunded liabilities have increased by 1.4 percent or more of GDP in 13 quarters, while these liabilities have fallen by 1.4 percent or more in just two quarters. These issues are particularly important given the significant stock market declines since the start of the year, suggesting that further substantial increases in unfunded liabilities are likely.
Donald J. Boyd and Yimeng Yin, January 20, 2016
Across the country, all eyes are on the record Powerball jackpot and while one or more lucky winners may be sharing a fortune, what will ticket sales do for state revenues? According to Rockefeller Institute researchers Lucy Dadayan and Don Boyd, every dollar brought in by states helps, but net revenues from lottery sales are not big in the scheme of state budgets. In their most recent By the Numbers Brief, Dadayan and Boyd indicate that gross lottery sales in fiscal year 2014 were approximately $70.2 billion, and yet net revenues for state budgets after payment of prizes, administrative costs, and other expenses made up a more modest $18.1 billion return to states, or about 2 percent of tax revenue. Despite the fact that lottery revenues are frequently directed to dedicated purposes (e.g., education), higher lottery revenue does not necessarily translate into increased state spending for those purposes.
Donald J. Boyd and Lucy Dadayan, January 13, 2016
A new brief released by the Rockefeller Institute indicates that a majority of states are forecasting slower personal income tax and sales tax revenue growth in 2016 and 2017. The sluggishness in tax revenues is partly due to expected slower growth in the economy and long-term demographic changes as well as due to volatility in stock market and prolonged declines in oil and gas prices. This will result in continued fiscal challenges and economic uncertainties for the states, the brief concludes. The Rockefeller Institute’s By the Numbers briefs were developed to spotlight emerging trends in state economies and finances.
Lucy Dadayan and Donald J. Boyd, December 23, 2015
2015 was a good year for the accuracy of state revenue forecasts according to a new brief by the Rockefeller Institute of Government of SUNY. This year’s record contrasts with that of previous years, when errors in state revenue forecasts swelled during and after the last two recessions partly due to increased tax volatility. Despite the good news, state forecasters are facing large uncertainties due to implications of the volatility in the stock market, declines in oil prices, and interest rate hikes by the Federal Reserve Board. This is the first brief in the new By the Numbers series, which will provide short summaries of evidence on key state and local fiscal issues.
Donald J. Boyd and Lucy Dadayan, December 22, 2015
Despite the rising U.S. stock market and the fifth year of continuous growth in employment, state and local governments still face enormous fiscal challenges, including slow growth in tax revenues, cuts in most areas of spending, and difficulties in performing essential functions. Conditions will likely be inadequate to restore state government spending cuts, fund infrastructure expansion, pay for growth in Medicaid, and cover insufficiently funded public pensions, making the choices available to states even harder. This is the second of an ongoing series of reports funded by former U.S. Ambassador to Hungary Donald Blinken and his wife, Vera, longtime supporters of the Rockefeller Institute.
Donald J. Boyd and Lucy Dadayan, June 23, 2015
According to a new technical report released by the Nelson A. Rockefeller Institute of Government, increases in state revenue forecasting errors during the recent recession were driven by increases in revenue volatility. The report discusses how revenue forecasting errors have changed in recent years and examines the relationship between revenue forecasting accuracy and (1) tax revenue volatility, (2) timing and frequency of forecasts, and (3) forecasting institutions and processes.
Donald J. Boyd and Lucy Dadayan, September 30, 2014
The Great Recession hit all regions of the country hard, but the experience of the Midwest has been more complicated than other regions, Thomas Gais told the Fiscal Leaders' Roundtable at the 14th Annual Midwestern Legislative Conference of The Council of State Governments. After difficult years before the recession, the Midwest, like the Northeast, has seen a faster recovery than most other regions. Yet the need for public services may be growing disproportionately in the Midwest, as seen in indicators like a lack of health insurance and increased numbers of children in poverty. Paying for more services may be especially challenging to state and local governments in the Midwest, as there has been little growth in revenues. The situation raises questions about whether economic recovery can be sustained in the region without greater public support for infrastructure and education to boost growth.
Thomas L. Gais, July 16, 2012
New Jersey has led the nation in cutting state-local government jobs over the past year, Deputy Director Robert Ward told a New Jersey Government Finance Officers Association conference. His presentation reviewed recent fiscal trends for states and localities, and pointed to some choices elected leaders may need to consider in “an era of fundamental change” for public finance.
Robert B. Ward, September 22, 2011
States have been making more serious errors in estimating their revenues during tough economic times, according to this report by the Pew Center on the States and the Rockefeller Institute. Driven largely by increasing volatility in state revenue systems, this trend has major implications for officials who set budgets for programs and services while grappling with severe fiscal shortfalls.
The Pew Center on the States and the Rockefeller Institute of Government, March 1, 2011
A House subcommittee requested the Institute’s expertise on current fiscal trends, as part of an inquiry into the impact of federal legislation on state and local government revenues. Deputy Director Robert Ward said state leaders “now face budget choices that are more difficult than any since the Great Depression.”
Robert B. Ward, April 15, 2010
This article builds on previous research and analysis of fiscal sustainability for state and local governments. First, it reviews recent history of states’ expenditures and revenues, as background for the emerging concern over sustainability. The article describes evolving themes in analyses of state/local fiscal pressures over the last three decades, discusses varying definitions of fiscal sustainability that have been offered in previous literature, and argues for greater precision in such definitions. Finally, the article examines potential action by the Governmental Accounting Standards Board in this area, and discusses how developments in the economy, and potential action at the federal level, may influence state and local budgets in years to come.
Robert B. Ward and Lucy Dadayan, Publius: The Journal of Federalism, June 2009
National experts on state finances, including Rockefeller Institute Senior Fellow Donald J. Boyd, analyzed trends in state/local revenues and expenditures at a forum focusing on the economy’s impact on state and local governments.
Public Policy Forum, November 13, 2008
Presentations and Multimedia
Institute Senior Fellow Don Boyd recently gave his perspectives on the current state of revenues in the states to Fall 2008 Annual Meeting of the National Association of State Budget Officers. Boyd looked at how state revenues are being impacted by the weakening economy and he discussed his insights for the future.
October 18, 2008
State and local spending for social welfare programs — including cash assistance, medical assistance, and social services — fell in 2006 after adjusting for inflation and need, according to a new report from the Rockefeller Institute.
Thomas Gais and Lucy Dadayan, September 2008
Read the news release
In a presentation to analysts at Fidelity Investments, Rockefeller Institute Senior Fellow Donald J. Boyd examined the impact a new recession is likely to have on state and local government finances. Volatility in state revenue systems may force midyear spending reductions this year and other unpopular policy actions in 2009 — with particular risk for states that rely heavily on capital gains. Includes data on state budget gaps, reviews the revenue impact of the 2001 recession, and explores differences among states in the volatility of state and local tax revenues.
Donald J. Boyd, March 2008