Furloughs and Tax Revenues Indicate Depth of States' Budget Crises

A number of states proudly announced that they had made the June 30 deadline to complete their fiscal 2010 budgets, but the reality is that those agreements, where they exist, are meaningless. According to data compiled by the Nelson A. Rockefeller Institute of Government, income tax revenues in many states are declining faster than they can cut their budgets. Total income tax collections in 37 of the 41 states that have a broad-based income tax, were down 26%, or $28.8 billion in the January-April 2009 period, compared to the same period in 2008. Arizona led the way with a 54.9% collapse in income tax revenues, followed by South Carolina, Michigan, California, Vermont, New York, Rhode Island and New Jersey, all at over 30%. Eleven other states saw declines of over 20%.

Furloughs of state employees have become one of the measures of choice by state governors for dealing with the fiscal collapse. According to tallies by the National Conference of State Legislators and the American Federation of State, County and Municipal Employees, more than 728,500 employees in at least 21 states have already been or will be furloughed, and 54,000 employees have been laid off. The furloughs translate into substantial pay cuts and reductions in state services. Criminal trials have to be delayed, parolees go unmonitored, disability checks and unemployment claims take longer to be processed, and so on.