States Facing Revenue Shortages As Housing Slows

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Not to say we did not tell you, but (and there always is a but) we did this time. The rampant spending by state legislatures on the back of the housing boom is now causing shortfalls in the legislatures budgets across the country.

Easy money from real estate transfer taxes and home appreciation allowed states and cities to add services that were not needed but seen as political gravy to keep these politicians in power. Now that the housing boom has slowed and with it the money, will these politicians shut down their ill concieved pork expenditures?

Most likely not, they will instead cut essential services that will create enough havoc in their states so that people will go along with higher taxes. The greed of a politician should never be underestimated.

Nowhere is the downturn more apparent than in Florida, where tax revenue is projected to drop this year for the first time since the energy crisis of the 1970s.
But other states, especially those where housing prices soared in recent years, are also seeing their collections slow, especially in the sales and real estate transfer tax categories. While the economy remains generally strong and it is too early to predict whether the housing slump will have long-term effects, some states will have to adjust their wish lists.
For example, New Jersey could face a $2.5 billion shortfall by mid-2008, Gov. Jon S. Corzine has said, and may lease its turnpike or its lottery to a private company to raise money. In California, where income tax receipts in January were $1 billion less than forecast, a nonpartisan legislative analyst has urged budget cuts and warned that the state could have about $2 billion less in revenue this year and next than Gov. Arnold Schwarzenegger has projected. via the New York Times