The 2002 Downturn in State Revenues: A Comparative Review and Analysis

We analyze the behavior of state revenues since the early 1950s to determine the severity of the revenue declines experienced by states after the 2001 recession. Both total state revenues for the nation and state-level data for each state are studied. We conclude that the states were indeed hit with an unprecedented downturn in revenues unlike anything that had been experienced in the preceding half-century. Further and contrary to general perceptions, revenue increases in the years preceding the downturn were not particularly strong compared to revenue increases in the years leading up to previous recessions. We further conclude that most proposed budget rules dealing with either taxes, spending, or savings would have been insufficient to address the states' problems and that states will need major discretionary structural changes in state revenues and expenditures to return to fiscal balance.

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	Giertz, Seth H Assistant Professor of Economics Expertise: Property & Sales Tax Public Finance Taxation Social Security Economics CBA 368 P.O. Box 880489 University of Nebraska-Lincoln Lincoln, NE 68588-0489, USA Phone: (402) 405-9454 Fax: (402) 472-9700 sgiertz2@unl.edu	Giertz, Seth H	Economics