Tax revenue collected by most states in the fourth quarter of 2011 was 3 percent higher than it was during the last quarter of 2007, when the recession hit, report says.
State tax collections, which during the recession experienced their steepest and longest drop since at least the Great Depression, have been climbing for the past two years and now surpass their previous peaks, according to a report issued Thursday.
The total amount of tax revenue collected by the states in the fourth quarter of 2011 was 3 percent higher than during the last quarter of 2007, when the recession hit, according to the report by the Nelson A. Rockefeller Institute of Government, in Albany, N.Y.
But the recovery has been uneven: 17 states, including Washington, collected less in taxes in the fourth quarter of 2011 than four years earlier.
In Washington, tax collections from October through December were about 7 percent less than in the fourth quarter of 2007, according to state officials.
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“We’re nowhere near the peak,” said Mike Gowrylow, spokesman for the state Department of Revenue.
Washington relies heavily on sales-tax collections, which haven’t returned to their peak. While consumer spending largely has returned, construction remains in the dumps. And construction historically has been a big generator of sales taxes.
Still, surpassing the 2007 peak in the country at large was an important milestone.
States have struggled mightily to balance their budgets, but huge challenges remain.
“You could say that the glass is half full, but we have to be aware that the glass is still half empty, and states still have a long way to go before full recovery,” said Lucy Dadayan, a senior policy analyst at the institute, who wrote the report.
The outlook varied by region. The Plains region had the biggest gains, with those states collecting 12.5 percent more in taxes in the last quarter of 2011 than they did during the same period a year earlier.
The Great Lakes region had an increase of 8.9 percent.
The only region with a decline was the Far West, which had a 3.9 percent decrease, driven by an 8.3 percent drop in California, where several temporary tax increases lapsed.
While the outlook for states is better, local governments continue to struggle as property-tax collections are hurt by declines in home values.
The report warned that “services and functions that are largely funded by local governments, such as education and public safety, are likely to be under severe fiscal pressures for some time if current trends continue.”
Even as tax collections climb back, states are a long way from providing the kinds of services they did before the recession, according to a report Thursday by the Center on Budget and Policy Priorities, in Washington, D.C.
It said states have made $290 billion in spending cuts over the past five years — nearly three times what they raised through tax increases — and that state and local governments have shed more than 600,000 jobs since the recession began.
“There are long-term effects as well,” the report warned. “By diminishing the quality of elementary and high schools, making college less affordable and reducing residents’ access to health care, the cuts threaten to make the U.S. economy less competitive in coming decades.”
Seattle Times staff contributed
to this report.