Weak Stock Market and Declines in Oil Prices Depressed State Tax Revenues: Declines in State Tax Revenues in the Second Quarter Raise a Yellow Flag for State Budgets

Source: Lucy Dadayan and Donald J. Boyd, Nelson A. Rockefeller Institute of Government, State Revenue Report, no. 104 September 2016

From the press release:
State and local government tax revenues showed continued slowdown in the first half of 2016, mostly attributable to weak performance of the stock market and steep declines in oil prices. Year-over-year growth in state and local tax was a mere 3.0 percent in the first quarter of 2016, which is a substantial slowing from the 5.4 percent average for the four previous quarters. Overall, state governments have been hit harder than localities by slowing tax revenue growth. Total state tax revenue from all sources grew by 1.6 percent and local tax revenue from major sources grew by 4.4 percent in the first quarter of 2016.

The just-released State Revenue Report (SRR) of the Nelson A. Rockefeller Institute of Government provides detailed analysis of state government tax revenues in the first quarter of 2016 and provides an overview of preliminary data for the second quarter of 2016. The report also provides state forecasts for fiscal year 2017 for personal income and sales tax collections.

According to preliminary data, state tax revenues declined by 2.1 percent in the second quarter of 2016. Declines were widespread, affecting about half of the states. Those declines came at a time when most states had already adopted 2017 budgets. They may leave many 2017 state budgets with holes to fix.

State personal income tax revenues grew 1.8 percent on a year-over-year basis in the first quarter of 2016, down from the 8.1 percent average for the four previous quarters. Overall, 16 states reported quarterly declines in personal income tax collections.