It's the Recession!

So just what has been the primary cause of Pennsylvania’s fiscal challenges? Some would have you believe it is overspending, but the facts tell a different story.

In the Pennsylvania Budget and Policy Center's latest February Fiscal Facts, we find that every state (except North Dakota) has faced budget deficits in the past few years. The primary culprit: loss of state tax revenue.

  Recession Map
The situation in late 2009 (Center on Budget & Policy Priorities)
 

As a result of the Great Recession, state tax collections declined, on average, by 11% in the 2009-10 Fiscal Year — the largest drop on record. Making matters worse, growing numbers of Americans lost jobs, work hours, and their homes, driving up demand for state services.

The recession impacted states of all stripes — big and small, high-spending and low-spending. Even famously low-spending Texas, with its booming oil and gas business and lower-than-average unemployment, has seen its budget pushed into the red by drastic revenue declines. As Texas starts its new two-year budget cycle, the state has a $15 billion to $25 billion hole to fill (as much as 30% of the current budget).

Most states, like Pennsylvania, rely heavily on sales and income taxes. In 2008 and 2009, states saw these tax collections decline dramatically, with the worst occurring as the Great Recession officially ended in mid-2009. Tax collections continued to fall through the rest of 2009.

State Tax Revenue Plummets

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