Weekly Wrap: Taxpayers in 29 States Hit with Hikes

Twenty-nine states raised taxes or fees this year, bringing in an estimated $23.9 billion – the highest increase since at least 1979, according to data released this week. The reliance on so much new revenue is sudden, to say the least. In the previous year, tax and fee hikes totaled $1.5 billion.

That’s the word from the National Governors Association and the National Association of State Budget Officers, which together issued a state-by-state tally of actions taken to close ever-expanding budget gaps and balance state spending plans. The report is an update ( PDF ) of preliminary numbers released last month.

Eleven states upped their personal income taxes, accounting for $10.7 billion in new revenue. But a closer look reveals that most of that comes from just two states: California and New York, which raised payroll taxes for a combined $8.4 billion. California also accounted for $4.4 billion of the $6.1 billion in new sales taxes nationally.

Meanwhile, 22 states and Puerto Rico used layoffs to trim state expenses, and 23 states applied across-the-board cuts, according to the study.

The final report paints an even grimmer picture of state finances for fiscal 2010 that began for most states in July than last year, which was plenty painful. Last year’s general fund spending by states shrank by 4.8 percent and marked the first time on record that state year-to-year spending dropped two years in a row. There will likely be a third year: The report estimated that state spending this year will drop even more, by an “unprecedented” 5.4 percent.

The road to a national economic recoverywon’t be an even one, as highlighted by projections this week that show Arizona and Iowa heading in very different directions. Arizona State University economist Lee McPheters predicted that it would be three or four more years before the Grand Canyon State’s economy rebounds, The Arizona Republic reports . In Iowa, though, a state index of Iowa’s economic performance crept back into positive territory for the first time in 18 months, according to a story by The Des Moines Register .

Efforts to increase government performance have spread from states to the federal government. It’s no wonder since two of the Obama administration’s top performance officers have backgrounds in state government.

Business Week’s Dec. 7 issue tells the story of Jeffrey Zients, Vivek Kundra and Aneesh Chopra, whom the magazine labels “Obama’s Big Gov swat team.” The three are charged with ensuring that government agencies set clear performance goals and measure their progress. The idea is to save money but also to make sure the government operates efficiently.

Chopra, the chief technology officer, was former secretary of technology under Virginia Gov. Tim Kaine (D), also a disciple of performance management. Kundra, the chief information officer, worked for Chopra in Virginia before taking a job as the District of Columbia’s chief information officer.

There will be 37 gubernatorial races around the country in 2010, and many of those contests are already heating up. One of the most challenging for the GOP comes in Texas, where incumbent Gov. Rick Perry is trying to fend off a Republican primary bid from U.S. Sen. Kay Bailey Hutchinson. The New York Times Magazine offers its take on the race.

For Republicans, the magazine notes, “It’s bad enough that a sitting governor not beset by scandal is about to be embroiled in a costly (perhaps as much as $50 million) intraparty contest before a potentially tough general election. But in 2010, as the party writ large struggles to coalesce around a singular leader and message, the spectacle of two well-known Republicans savaging each other is a midterm gift to the Democratic National Committee.”

– Stateline.org staff writer Stephen C. Fehr contributed to this article.