States' income tax revenue fell by more than a fifth in April compared with a year before, a bad sign for governors and lawmakers who already struggled to balance this year's budgets, a new report says. <br>
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The weak performance increases the likelihood that more states will need to consider mid-year spending cuts for the second year running, budget officials told the National Conference of State Legislatures, which conducted the survey with several other groups. <br>
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The report, released Tuesday, discovered widespread weakness in states' revenue from individual income tax filings, the largest single source of money for state governments. The findings include: <br>
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Total individual income tax collections in April alone fell by 21.4 percent, or $8.5 billion, from April 2001. From January through April, collections fell by 14 percent, or $14.5 billion, compared with the year before. <br>
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At least 40 states reported that personal income tax collections were below projections, 12 of them more than 10 percent below. Only two states, Georgia and West Virginia, reported they were on target or above. <br>
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Income tax refunds increased by nearly 14 percent so far this year, with states paying out $2.5 billion more in refunds this year than last. Officials figured layoffs and reduced working hours spurred the rise in refunds. <br>
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``April sort of clinches it,'' said Arturo Perez, a senior analyst with the National Conference of State Legislatures. ``The numbers don't reflect anything that would cheer a state official up.'' <br>
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Other sources of revenue - sales taxes and corporate taxes - have also been weak this year. A preliminary report found corporate income taxes fell by 18 percent in the first quarter. <br>
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Though the recession officially ended last year, economists say states' financial woes will continue as unemployment remains higher than in recent years. Most states have returned to their budgets and cut spending over the past year, and budget writers have adjusted their projections downward. <br>
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But the new report found that, for the overwhelming majority, even the conservative estimates weren't gloomy enough. <br>
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State are ``looking now at a potentially out-of-balance budget in the upcoming year,'' Perez said. ``There's a lot of misery shared among the states. This is not isolated to one or two states, or just one region of the country.'' <br>
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States have faced budget shortfalls in the billions of dollars over the fiscal year that ends for all but four states this month. Nearly all have rejected general tax increases, choosing instead a mix of spending cuts and targeted tax hikes, such as higher cigarette taxes or corporate taxes. Kansas, however, recently raised sales taxes. <br>
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State leaders are also seeking help from Washington, hoping that the federal government will take on a larger share of the cost of Medicaid, the health care program for the poor, and offer a multibillion dollar infusion through block grants. <br>
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The survey was conducted by the NCSL, the Federation of Tax Administrators, the National Association of State Budget Officers, and the Nelson A. Rockefeller Institute of Government.
