State revenues are collapsing with the economy. A new study from the Nelson A. Rockefeller Institute of Government reports that state tax collections fell in the last quarter of 2008 for the first time since 2002 (see graph). Not only did the volatile personal and corporate income tax revenues drop but so did the usually more stable sales taxes—declining by 6 percent before adjusting for inflation.


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The situation is going to worsen before it gets better.  Every state’s economy showed decline in February (see map from the Rockefeller report) and no one expects improvement soon. So states will almost certainly watch their revenues fall further and, like the federal government, face worsening fiscal conditions.

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