Grim News For State Budgets

  • January 16, 2008
  • By Pamela M. Prah

Many states are greeting 2008 with a major budget hangover and are looking for relief from falling home sales, higher energy prices and reduced sales-tax collections after two years of overflowing coffers.

Red ink was showing up in as many as 20 state ledgers as the year began, and if the country dips into a recession, the number of states projecting deficits would certainly grow. "Clearly, it's a little more gloomy than it was once was," Raymond C. Scheppach, executive director of the National Governors Association, said.

The stalled housing market is hurting states across the board, but it's more severe for states such as Arizona, California, Nevada and Florida that rely heavily on real-estate taxes. A drop in home sales and prices mean states get a smaller cut — of sales taxes as well as real-estate-related levies — because most people who buy homes also purchase new appliances and carpeting and spend big money on home improvements.

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