State Net Capitol Journal – May 13, 2013

Budget & Taxes

TAX REVENUE SURGE YIELDS SURPLUS IN CA: On April 17 California received nearly $2.8 billion in personal income tax payments, the third-largest amount collected on a single day in the state's history. That haul - combined with a sizeable bump in business tax revenues - means the state will likely end the year with a $4.5 billion budget surplus, after years of deficits.

Assembly Budget Chairman Bob Blumenfield (D) was thrilled by the news.

"We're not framing the debate around what to cut," he said. "We're making choices about what kind of investments we want to make."

But Gov. Jerry Brown (D), whose administration projected the revenue surge and who engineered the passage of a tax hike in November as a "holding action" to keep the state's books balanced until the economy fully rebounds, said there may not be a whole lot of revenue available after various spending obligations are met. The bill for all of the state's borrowings over the past years of budget crisis, for instance, is expected to reach nearly $28 billion by the end of June, according to state officials.

"Depending upon how the money flows, it may not be as available as many people are now thinking," said Brown.

Some have also cautioned that the revenue surge may not last. Jerry Nickelsburg, senior economist at the UCLA Anderson School of Management, said federal statistics suggest many Californians cashed out investments late last year, fearing the budget standoff in Washington would lead to federal income tax hikes.

"If you had a choice of taking income in January or December, and you will pay less taxes in December, why wouldn't you do that?" he said.

If that was, in fact, a big reason for the revenue surge, state income could fail to keep pace next fiscal year, which starts in July.

Chris Thornberg, a founding partner of Beacon Economics in Los Angeles, meanwhile, is concerned state lawmakers will use the revenue spike as an excuse not to rein in public-employee benefits or reform the state's tax system, which is heavily reliant on income taxes, making the state prone to boom-and-bust budgeting.

"Maybe they will shock me and do the right thing," he said. "But I'm not holding my breath." (LOS ANGELES TIMES, STATE NET)

SLOW AND STEADY RECOVERY CONTINUES FOR MOST STATES: With some notable exceptions - like California - states are continuing to move along the path of slow and steady growth, nearly four years after the official end of the Great Recession, according to a new report from the National Conference of State Legislatures.

"While no strong indication exists that states are entering a robust recovery phase, the general outlook among legislative fiscal officials is one of stability, with a dose of uncertainty, as states continue to plod their way through an extended economic recovery," states NCSL's "State Budget Update: Spring 2013."

Thirty-seven states reported they were on track to meet their FY 2013 revenue estimates, and eight states projected revenues would exceed estimates. But Arturo Perez, director of NCSL's fiscal program, said that although "revenue collections met or exceeded expectations in most states, performance was uneven across the major tax categories."

"For example, states reported an increase in collections of personal income and real estate transfer taxes, but revenues from sales taxes were not as strong," he said.

Meanwhile, four states - Alaska, New Hampshire, New Jersey and West Virginia - said they were unlikely to meet their revenue estimates. (NATIONAL CONFERENCE OF STATE LEGISLATURES)

THOUSANDS POTENTIALLY DENIED FOOD STAMPS IN PA: A year ago, Pennsylvania tied eligibility for its food stamp program to applicants' or recipients' financial assets in an effort to root out waste, abuse and fraud. Since then, nearly 4,000 households have been denied access to or removed from the program, now called the Supplemental Nutrition Assistance Program, or SNAP, for having too much in assets, according to figures from the Department of Public Welfare.

Last summer, for instance, the department denied 39 applications because the applicants' household assets exceeded $100,000. Another 71 applications were denied during that same period because the applicants had assets of between $50,000 and $100,000.

Advocates for the poor, however, say far more people have been denied benefits not because they had too many assets but because they failed to provide the proper documentation to pass the asset test.

In the nine months since implementation of the test, on May 1, 2012, 111,215 households have had their applications rejected due to insufficient paperwork, 17,011 more than the number rejected for the same reason in the nine months prior to that date, according to the Greater Philadelphia Coalition Against Hunger. And the organization believes that surplus represents individuals who are eligible for food stamps.

"The asset test adds unnecessary red tape to an already cumbersome process," said Julie Zaebst, interim executive director of the group. "It's made it more difficult for eligible families and seniors to get help." (PHILADELPHIA INQUIRER)

BUDGETS IN BRIEF: The LOUISIANA Supreme Court has ruled that the method of funding the state's school voucher program, part of a package of reforms proposed by Gov. Bobby Jindal (R) last year, is unconstitutional (See Governors in this issue). In a 6-1 vote, the justices ruled that funds approved through the state's per-pupil allocation, known as the minimum foundation program, or MFP, must go to public schools (TIMES-PICAYUNE [NEW ORLEANS]). • NEW YORK Attorney General Eric Schneiderman said last week he intends to file a lawsuit against Bank of America Corp and Wells Fargo and Co for violating the terms of the multi-state mortgage abuse settlement. The action is the first to be announced alleging banks that agreed last year to provide $25 billion in relief to homeowners and comply with a set of mortgage servicing standards to make amends for their foreclosure misconduct, are not living up to the terms of that agreement (REUTERS). • Gambling revenue rose nearly five percent in the U.S. in 2012, according to a survey by the American Gaming Association. But gambling revenues dropped 8 percent - the biggest decline in the nation - in NEW JERSEY, likely because of Hurricane Sandy (NEWJERSEYNEWSROOM.COM). • A circuit court judge in VIRGINIA has declared the tolls on the state's Midtown and Downtown tunnels unconstitutional, potentially leaving the state on the hook for over a billion dollars in debt incurred in the ongoing Elizabeth River Crossings construction project. Portsmouth Circuit Judge James A. Cales Jr. said the General Assembly exceeded its authority in granting the state transportation department "unfettered power" to set toll rates "without any real or meaningful parameters." Gov. Bob McDonnell (R) said the state would appeal the ruling to the state Supreme Court (VIRGINIAN-PILOT [NORFOLK], STATE NET).

- Compiled by KOREY CLARK

The above article is provided by the State Net Capitol Journal. State Net is the nation's leading source of state legislative and regulatory content for all states within the United States. State Net daily monitors every bill in all 50 states, the District of Columbia and the United States Congress - as well as every state agency regulation. Virtually all of the information about individual bills and their progress through legislatures is online within 24 hours of public availability.

If you are a lexis.com subscriber, you can access State Net Bill Tracking, State Net Full Text of Bills, or State Net Regulatory Text. If you are interested in learning more about State Net, contact us.

...

For insightful analysis and practical guidance on state and local taxation, explore Bender's State Taxation: Principles and Practice.

Discover the features and benefits of LexisNexis® Tax Center.

For quality Tax & Accounting research resources, visit the LexisNexis® Store.

To subscribe to the Capitol Journal and access archived issues go to the State Net Capitol Journal.

For more information about LexisNexis products and solutions connect with us through our corporate site.