WASHINGTON -- A weak economy in the third quarter continued to curb state revenue collections and force state officials to rely heavily on legislated tax increases to keep their budgets in balance, according to a survey released yesterday.
The survey by the Center for the Study of the States in Albany found that state tax collections in the period from July through September rose 4.5%, from the same period a year earlier.
However, after excluding increases in personal tax rates and other types of taxes, state revenues were up only 1.3%.
"This confirms other economic evidence that the recession still holds many parts of the nation in its grip," says the report, which was prepared by Steven D. Gold, director of the center. "The revenue trends in many states are surprisingly weak, considering the tax increases that took effect during this period."
Combined, states raised taxes about $15 billion in this year's legislative sessions, according to the report.
In an interview, Mr. Gold called the report's findings disappinting.
"As long as the econmy remains in the doldrums, state finances will continue to be sick," he said. "I thought by now we'd be seeing some signs of improvement, but it doesn't look like it."
The Commerce Department's preliminary estimate last month said U.S. gross national product advanced at an annual rate of 2.4% in the third quarter, leading the Bush administration to say the recession is over.
However, other government reports suggest the economy is faltering and growing only slightly.
Much of the improvement in GNP came in inventory adjustments by business, and that does not help state revenue collections, Mr. Gold said. He noted that high unemployment brings sluggish income growth and makes people afraid to spend, hurting sales tax receipts.
According to the center's report, the biggest tax increases came in Arizona, Arkansas, Idaho, Nebraska, New Mexico, New York, North Carolina, Pennsylvania, and Vermont. In some other states, such as New Jersey, states are still pulling in more taxes based on increases approved in 1990.
Over all for the third quarter, personal income taxes showed the biggest gain, rising 4.3%. General sales tax revenues rose 2.9%, and corporation income taxes were up 2.4%.
Many states resorted to increases in retail sales taxes to bring in more money. California, for example, boosted the retail sales tax rate from 4.75% to 6%, and Minnesota raised its rate from 6% to 6.5%.
Pennsylvania, California, Rhode Island, Minnesota, and Connecticut also raised personal income taxes.
Ten of 49 states surveyed reported decreases in total tax collections: Montana, Connecticut, North Dakota, Georgia, Maine, Rhode Island, Michigan, Nevada, Louisiana, and South Carolina.
"There are still many parts of the country that are in recession, such as California and the Northeast," Mr. Gold said. "States are in for another very excruciating year in 1992, when they have to pass their new budgets," he said.
The Center for the Study of the States is affiliated with the State University of New York in Albany.
