Claremore Daily Progress

State/Nation

December 10, 2012

Fiscal cliff stalemate spurs anxiety in states

(Continued)

JEFFERSON CITY, Mo. —

And if nothing is done, state budgets also would feel the ramifications of federal tax increases, though not necessarily in a negative way. Because of how their tax codes are linked to federal regulations, more than half the states could see an increase in state income tax collections if cuts are made to federal income tax deductions and credits.
But that potential boost in state revenues could be wiped out if the plunge over the fiscal cliff were to result in another recession, said Ingrid Schroeder, a research director at the Pew Center on the States. Rising unemployment could mean more people qualifying for Medicaid and other government services, costing states additional money.
This past week, bipartisan groups of governors and state lawmakers met with President Barack Obama to urge a solution that doesn’t pass the buck to local governments.
“Don’t make the states pay the lion’s share of whatever this medicine is that we’ve all got to swallow,” said Arkansas Gov. Mike Beebe.
As governors pressed for resolution, state financial directors churned out dire predictions.
New York Comptroller Thomas DiNapoli warned that state and local governments may have to consider additional tax hikes to counter a projected $5 billion reduction in federal funding over nine years. The burden would fall on some residents who “are literally digging out from (Superstorm) Sandy’s devastation,” he said.
A report prepared for the Texas Senate estimated that nearly 4,000 jobs could be lost as a result of a projected $565 million cut in federal funds for child care, job training, cancer and AIDS screenings and other services affecting nearly 2 million Texas residents.
Oklahoma Gov. May Fallin said the state could lose as many as 8,000 jobs in the aerospace and defense industries, and Minnesota state economist Tom Stinson forecast “ultimate gloom” under a fiscal-cliff induced downturn that he said could cost 115,000 jobs in 2013-2014 and hundreds of millions of dollars of lost state tax revenues.

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