Hard-Pressed States Raise Taxes by $7.6 Billion in ’90

States increased taxes by an estimated $7.6 billion during 1990 legislative sessions, pushed by higher costs for schools, prisons and health care, a study released today said.

In its annual survey of state budgets, the National Conference of State Legislatures said it expected state finances to continue to deteriorate in the coming year.

“State balances fell throughout fiscal 1990 and for most states--including all the larger states--are now dangerously low,” the group said.

“The national average balance fell from 4.5% of expenditures at the end of fiscal 1989 to 4% at the end of fiscal 1990 and is expected to fall to 2.3% by the end of fiscal 1991,” it said.

Those balances are considered indicators of state fiscal conditions, and many states try to maintain a balance of 5% of general fund spending. The balance is considered a cushion against emergencies for states required by law or constitution to have balanced budgets.

The NCSL released its report at its annual meeting being held this week in Nashville, Tenn.

The report said many state fiscal conditions weakened during the last year. Northeast and New England states were the hardest hit.

Tax increases were passed in 23 states. Those tax increases are expected to increase revenue by $7.6 billion in fiscal 1991, an increase of 2.6% of state tax collections.

The study said spending for Medicaid, education and corrections grew faster than general state revenue. Medicaid spending grew at a 25% annual rate, putting pressure on state budgets.

Of the three major types of taxes, 10 states increased personal income taxes, the report said. Ten raised corporate income taxes, and 17 raised sales and use taxes.

The biggest tax increases were in New Jersey, Massachusetts, Florida, New York, Kentucky and Texas.

Other states raising taxes were Connecticut, Maine, New Hampshire, Rhode Island, Vermont, Delaware, Ohio, Kansas, Nebraska, Alabama, Louisiana, Tennessee, Virginia, Arizona, New Mexico, Oklahoma and Washington.

New Jersey’s increase totaled $2.2 billion, or 21% of 1989 revenue, the report said. Massachusetts’ increase was $1.16 billion, or 12.8%, and Florida’s was $1.09 billion, or 8.7%, the report said.

States listed as lowering taxes were Indiana, Iowa, Minnesota, South Carolina, Utah and Hawaii. All of the decreases were small, the report said.