NCPA - National Center for Policy Analysis

States Coping With An Embarrassment Of Revenues

April 10, 2000

Most of the states have so much money flowing into their coffers that they are inventing new ways to spend it -- as well as giving some of it back in tax reductions.

Cato Institute economist Stephen Moore reports that states are increasing their budgets by 6, 7 and even 8 percent a year.

  • New York, California, Texas, Maryland, Minnesota, Indiana, Washington, Pennsylvania and Michigan have each been amassing annual surpluses exceeding $1 billion.
  • A few states, however, are not reaping much of this harvest because of the peculiarities of their tax systems or because of their economies -- Wyoming, Iowa, Kansas, Tennessee, and New Hampshire.
  • Spending increases combined with tax cuts have lowered states' rainy day reserves from $37.5 billion last year to $30 billion this year.
  • Michigan's situation is the envy of all states -- with revenues pouring into its treasury at the rate of $2 million more a day than the governor's economists predicted just a year ago, and hundreds of thousands of dollars a day above their predictions as recently as January.

States' surging revenues are coming from taxes on prosperous industries, fully employed work forces, stock market gains and this year -- for the first time -- from the settlement of their suit against the tobacco industry.

Source: Peter T. Kilborn, "A Resurgent Michigan Leads Newly Flush States," New York Times, April 10, 2000.


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