The chart above is taken from the Rockefeller Institute of Government’s latest report on state finances, based on Census Bureau data. Overall state tax collections in the second quarter of 2009 declined by 16.6 percent (17.8 percent when adjusted for inflation) from the same quarter of the previous year.
That is the largest slide in state tax collections at least since 1963. The decline was driven primarily by a deterioration in personal income tax revenues.
In Florida the collections are trending $2.6 billion in the red for FY2010 after only a few months. This year, the Legislature and Gov. Charlie Crist approved $2.2 billion in higher taxes and fees.
A new Florida financial report shows that all the tax increases, spending cuts and raids on savings accounts weren’t enough for Florida’s budget, which could have a deficit next year of as much as $2.6 billion.
The main cost-driver — Medicaid. The subsidized health care program for the poor is growing as the economy shrinks. And the federal stimulus money that helped the state avoid deep budget cuts runs out in December — in the middle of the next budget year. Not clear how much of the Medicaid deficit is for illegal aliens, but guesses are a whole lot of it is.
Senate budget chief J.D. Alexander fretted that the federal government could pick up so little for Medicaid that it could cost the state an extra $3 billion. Alexander acknowledged it was a worst-case scenario, but he said the state needs to be on its guard.
“It’s devastating,” Alexander he said. “Three billion dollars is equivalent to a penny sales tax.”
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