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Tax Law

State Net Capitol Journal – June 17, 2013

Budget & Taxes

STATE REVENUES SURGE IN 1Q: States experienced a surge in tax collections in the first quarter of 2013, according to an alert released this month by the Nelson A. Rockefeller Institute of Government. Compared to the first quarter of 2012, tax revenues overall were up 9.3 percent, preliminary data show. North Dakota's revenue jumped 74.6 percent year-over-year, while California's rose 34.9 percent.

Personal income tax collections were the biggest driver of the growth surge, increasing 17.6 percent. (Sales taxes rose 6 percent, while corporate income taxes grew 3.5 percent.) The institute attributed much of that growth to taxpayers' acceleration of income into 2012 to avoid possibly higher federal taxes in 2013. And its alert noted that California's 52.2 percent, or $6.3 billion, rise in income tax collections was largely responsible for the increase overall.

For those and other reasons, particularly growing state spending pressures, Lucy Dadayan, a senior policy analyst at the institute, cautioned against getting too excited about the revenue surge.

"On one hand, we have slowly improving revenues, and on the other hand we have rapidly growing spending pressures, including rising health care costs and growing pension liabilities," she said.

As the institute's alert concluded: "State tax revenues have been continuously recovering for over three years now. However, state revenue recovery has been much slower and more prolonged than in previous recoveries, and revenue is still far from full recovery. While state tax revenues have shown strong growth in the fourth quarter of calendar year 2012 and in the first quarter of calendar year 2013, that is likely not an indication of rapid improvement in underlying economic factors." (STATELINE.ORG, ROCKINST.ORG)

NYC MAYOR PITCHES SWEEPING STORM PROTECTION PLAN: Last week, less than a year after Hurricane Sandy hit the eastern seaboard and with only 203 days left in his final term, New York City Mayor Michael Bloomberg unveiled a sweeping plan to protect the city from future storms. The plan, laid out in a 438-page report, included 250 recommendations, such as fortifying the city's power grid, renovating buildings to make them more hurricane resistant and erecting flood barriers around the city, including a system of permanent levies on Staten Island.

The plan would cost about $20 billion over ten years - to start. The cost of some of the plan's more ambitious proposals, like the construction of a so-called Seaport City south of the Brooklyn Bridge in Manhattan, modeled after Battery Park City, aren't included in that estimate.

"This plan is incredibly ambitious - and much of the work will extend far beyond the next 203 days - but we refused to pass the responsibility for creating a plan onto the next administration," Bloomberg said in a speech at the Brooklyn Navy Yard. "This is urgent work, and it must begin now."

The administration said roughly half the initial $20 billion required would come from federal and city money allocated in the aftermath of Sandy. Another $5 billion in aid had already been approved by Congress, leaving $5 billion for the city to raise.

Bloomberg acknowledged the price tag for the plan was high, but he said the cost of not taking action would be far higher. Sandy cost the city $19 billion in damage and loss of economic activity, he said, but a similar storm three decades from now would cost $90 billion.

"This is a defining challenge of our future," he said.

The plan was generally praised by business and environmental groups. But with officials having projected that over 800,000 city residents would live in 100-year flood zones by the 2050s, more than double the number currently at such risk, some experts questioned whether more consideration needed to be given to evacuating some areas of the city.

"I think that the mayor's plan is great," said Robert S. Young, director of the Program for the Study of Developed Shorelines at Western Carolina University. "I really appreciate the fact that he acknowledges the problem and understands climate change and the fact that we need to prepare for it. But everyone needs to understand that you can't guarantee protection for infrastructure that is in vulnerable locations, no matter how much money you throw at the problem." (NEW YORK TIMES)

US LEADS WORLD IN SHALE OIL PRODUCTION - FOR NOW: The United States is currently the world leader in shale oil production, on pace to produce more than 3 million barrels of shale oil per day within the next few years. But new estimates of the world's potential shale resources by the U.S. Energy Information Administration suggest America could eventually be eclipsed in the shale oil revolution by Russia, China and developing countries like Argentina and Algeria.

By the agency's reckoning, Russia, already the world's second-largest oil producer from conventional reservoirs, has about 75 billion barrels of shale oil buried in the underground bedrock of Siberia, while the United States has about 58 billion barrels in underground formations extending from New York to Alaska.

But America is well ahead of Russia and every other country in exploiting its shale oil resources, with U.S. companies having pioneered the advanced technologies required to extract oil from solid rock. Russia hasn't even determined whether doing so is economically feasible.

"In essence, we will still be the leader as Russia and China don't have the resources for now" to get their shale oil out of the ground, said Jason Schack, marketing support representative at oilfield services company Baker Hughes. (WASHINGTON TIMES)

BUDGETS IN BRIEF: A federal audit revealed that GEORGIA's Labor Department failed to detect and recover millions of dollars in unemployment benefits improperly paid over a three-year period despite the ready availability of a system to cross-check new hires. Over that period, the state overpaid $58.7 million in benefits and recovered just $14.9 million, or 25 percent, of that total (ATHENS BANNER-HERALD). • NEW HAMPSHIRE's GOP-led Senate passed a budget last week that blocks Medicaid expansion, limits an increase in the cigarette tax to 10 cents a pack, increases spending for charter schools and potentially cuts hundreds of state jobs. The Senate's action sets up a showdown with the Democrat-controlled House which passed a spending plan that diverges with the upper chamber's on all of those points (CONCORD MONITOR, STATE NET). • Detroit, MICHIGAN's emergency manager is reportedly close to reaching a deal with at least two secured creditors that could help prevent a municipal bankruptcy filing. But even with the creditor agreements, the city may still have to file for Chapter 9 bankruptcy protection within the next few months (WALL STREET JOURNAL). • CALIFORNIA Gov. Jerry Brown (D) and legislative leaders reached agreement last week on major elements of the state budget, including concurrence on the governor's relatively conservative economic forecast for the year despite a recent surge in the state's tax revenues (SACRAMENTO BEE). • The Federal Emergency Management Agency has denied TEXAS' request for aid to help rebuild the area of West, Texas destroyed by the fertilizer plant explosion in April. In a letter to Gov. Rick Perry (R), FEMA Administrator Craig Fugate said the agency had made payments to individuals affected by the blast, and "the remaining cost for permanent work is within the capabilities of the state and affected local governments" (BLOOMBERG). • WASHINGTON Gov. Jay Inslee (D) convened a cabinet meeting last week to discuss a possible government shutdown if the Legislature fails to pass a budget by June 30 (OREGONLIVE.COM, STATE NET).

- Compiled by KOREY CLARK

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