With falling revenues and declining tax bases ripping holes in state budgets from California to Rhode Island, it’s been a bad few years for state governments. But a new report from the Nelson A. Rockefeller Institute of Government has some heartening news—state tax revenues have risen to $184 billion, higher than the pre-recession levels of $179 billion in 2007.Needless to say, this is a good sign. Though the economy is not nearly back to full capacity, the American economy is resilient and is fighting to come back.Yet there is also a darker side to this report. Tax revenues may have topped pre-recession levels, but these gains have been eaten away by inflation and the rising cost of services—especially healthcare. State budgets are still in trouble, and as long as healthcare costs continue to rise faster than inflation and state employers retain overgenerous, underfunded pension systems, state and local governments are likely to remain in trouble even with substantial increases in tax revenue.The smart states will continue to reform and change. Increasing revenues are an opportunity to deal with the crisis, not an excuse to ignore it.
State Tax Revenues Up, Budget Crisis Not Over