NEW YORK (MktNews) - Weaker consumer spending in the U.S. has slowed sales tax revenue growth and higher costs for labor and medical care have placed increasing strain on municipal budgets, Moody's Investors Service said Thursday in a statement.
"The National Conference of State Legislatures recently reported that revenue growth for some states - particularly in the upper Midwest and the Southeast - has slowed. However, not all states are experiencing overly weak revenue gains," the statement said.
"We are in the process of establishing an ongoing monthly review of the 15 largest states in terms of revenue. Based upon a preliminary review, revenues in some states are still fairly healthy."
The top four states in terms of revenue are California, New York, Texas and Florida. The latter two do not have a state personal income tax. General fund revenues in these four states grew by 18.7% annually in January and February, which was up from the 8.3% yearly advance in the fiscal year-to-dates through December. Most states operate on a June 30 fiscal year with New York one of the few exceptions (like Japan, New York's fiscal year ends on March 31).
Personal income taxes in California and New York blasted higher by 28.8% annually in January and February. That was up from a 15.8% yearly rise in the fiscal year periods through December.
Sales tax revenue growth has slowed. The $10.0 billion of January-February sales tax revenues in California, New York, Texas and Florida was up 4.3% from the comparable period of 2000. In the fiscal years through December, sales tax revenues in these four states climbed 6.5% year-to-year.
Note that none of the aforementioned should be viewed as a statement as to the rating or creditworthiness of the respective states. The revenue figures merely suggest that tax receipts in some states are still strong.
The timing of estimated tax payments, changes in tax laws and other factors can influence monthly revenue collections. The federal government's monthly budget statement nevertheless seems to corroborate a still healthy pace of state tax revenue growth.
Federal government payroll tax receipts grew by 7.5% annually in the quarter ended February, which was slightly below calendar year 2000's 7.7% yearly rise but above the 6.7% advance in 1999. For the 12 months ended February 2001, the 12.4% yearly rise in the U.S. government's personal income tax receipts topped the 9.1% annual increase in the 12 months ended February 2000.
Particularly if retreats in consumer confidence and corporate earnings weaken consumer spending and hiring activity, tax revenue growth could slow considerably by the middle of the year. While the risk of revenue shortfalls is growing, tax revenues do not yet appear to have sunk to a recessionary pace, Moody's said.