State and Local Reporter - 08/05/2003 (Plain Text Version)

Debora Trimpe, Chair
Flower Mound, Texas

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In this issue:
Brookings' Report on Impact Fees Is Flawed, Says NAHB
Texas Adopts Major Building Industry Reform Package
Big Picture Look at State, Local Governments' Fiscal Crises
Notice and Opportunity to Repair Legislation Recap
New IRS Web Site for Sec. 527 Groups
Legal News: Two Precedent-Setting Cases Could Reach Supreme Court
Get State, Federal Legislative Information on Enhanced NAHB Web Site
NAHB-Supported Federal Tax Bill a Plus for Builders and Small Businesses
SLGA Conference Helps Alaska Association Advance NOR Bill
Industry News
Tools Available to Promote Positive Industry Image

Big Picture Look at State, Local Governments' Fiscal Crises

Most state legislative sessions have adjourned, giving state and local government interest groups a chance to reflect on how governing bodies handled the worst fiscal crisis in decades.

State Governments Increase Taxes and Fees, Cut Spending to Balance Budgets

According to reports by the National Conference of State Legislatures (NCLS) and the American Legislative Exchange Council (ALEC), of the states that have completed their budgets thus far,

20 states have raised taxes by $13.1 billion.
31 states cut spending, even though overall spending is increasing. While states cut over $8 billion from fiscal 2003 budgets this year, total spending will increase by over $11 billion.
29 states tapped a variety of state funds. Total state borrowing in fiscal 2002, including general obligation, special revenue and tobacco settlement bonding, was $30.2 billion. That increased to nearly $68 billion in fiscal 2003.
23 states reduced their state workforces or took other actions affecting state employees.
13 states withdrew from rainy-day funds.
11 delayed capital projects or shifted them from pay-as-you-go projects to debt.

The National Governors Association (NGA) reports that 29 states recommended tax and fee increases in fiscal 2004, resulting in a net increase of $17.5 billion, which is the largest increase since 1979.

NCSL and ALEC are bipartisan organizations of state legislators and, in the case of NCSL, legislative staff. NGA is a membership organization of governors in the U.S. states, territories and commonwealths.

Local Governments Feel Trickle-Down Effects
State aid to local governments took a hit in many states, making it more difficult for municipal and county government to provide services. A survey of 330 cities and towns conducted by the National League of Cities (NLC) shows that cities are raising fees and taxes while cutting infrastructure spending and city staffs.

Highlights of the survey include:

Four out of five cities (79%) are less able to meet financial needs than they were during the previous year.
Cities face a 4% gap between revenue and spending, the highest gap in more than a decade.
State aid to cities has declined and will continue to decline.
In response to fiscal pressures, 61% of cities and towns are increasing fees. 54% are creating new fees and drawing down their rainy day funds. 25% are increasing property taxes.

In addition, the National Association of Counties reports that 70% of counties are facing budget shortfalls.

For more information, link to:

NCSL fiscal report
ALEC press release: "State Taxes Surve 48 Percent Mid-Year"
NGA press release
NLC press release
NACo press release