Low jobless rates and rising incomes are helping to fatten state coffers across the U.S. Revenue from sales, personal and corporate taxes is on the rise –the best growth since before the Great Recession.
States can expect healthy tax revenues for at least the next several quarters as low unemployment continues, incomes slowly rise, inflation increases modestly and higher energy prices generate more income for states with severance taxes.
But the outlook for individual states is varied, with several regions facing big challenges. The trade war with China is battering the agriculture industry in the Midwest and the prairie states and crimping activity at Southern ports. Manufacturing is slowing down because slowing global growth is hurting exports. New England’s economy is slowing as employers struggle to find the workers they need.
Although construction spending is up markedly this year, most states won’t boost spending much. As they prepare for 2020, governors and legislatures are eyeing modest spending increases –perhaps reversing cuts made after the Great Recession. They also intend to sock away some of the newfound revenues in rainy-day funds. (See our list of States Most Unprepared for the Next Recession.)See the breakdown HERE