This is a post from Jim Haughey's blog that covers the US construction industry.

Jim Haughey is the Chief Economist for Reed Construction Data and has over thirty years experience as a business economist, including twenty years monitoring the construction market. He has a Ph.D. degree in economics from the University of Michigan and has previously taught at the University of Michigan, Ohio University, Michigan State University and the University of Massachusetts.

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Construction Industry Forecasts

Notes from Jim Haughey - Apr 19, 2011

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State tax receipts rising quickly but remain below pre-recession level
Jim Haughey, RCD Chief Economist

Municipal tax revenue, mostly property taxes, has now begun to expand but remains below the year ago level. Local governments are also suffering from reduced and generally still declining state grants.  K-12 schools, public safety and public works construction funding will suffer the most from cutbacks at the municipal level.

North Dakota (+42%) and Wyoming (+34%) had by far the largest 4th quarter tax receipt gains versus the fall of 2009.  In general, all commodity dependent states have had strong revenue gains for several quarters.  This will continue at least well into the summer. Tax receipts in both of these small states are extremely volatile so both states keep large reserves to cover spending during periods of depressed commodity sales. The tax gains are based on data compiled by the Rockefeller Institute of Government and the Census Bureau.

Louisiana (-12%) and Alaska (-14%) are outliers at the bottom of the list. While both are commodity dependent states, both suffered commodity tax losses last year.  Louisiana suffered from the Deepwater Horizon oil well blowout and the resulting fear of polluted beaches and seafood and the federal prohibition of new offshore well drilling. Alaska’s only commodity is oil. Pipeline problems limited oil sales. Alaska has lots of natural gas but missed the recent the recent drilling boom because there is yet no pipeline to market the gas. Both states will see a sharp improvement in tax receipt trends this year.

Apart from these four outliers, the largest tax receipt gain was 19% in New York State. A tax increase contributed to the gain but it was mostly the result of a positive turnaround in financial industry profits and a surge in receipts from the income tax on capital gains and the very progressive income tax rates. Most states with progressive rates experienced rapid tax receipt recovery just as they earlier experienced a relatively sharp drop in tax receipts.

Other states with large year to year tax receipt gains include New Mexico and Arizona (+17.7%), California (+16.8%), Oregon (+14.1%), Illinois and Hawaii (+10.4%) and Massachusetts (+9.5%). Tax rate increases contributed to each of these gains.

Other states with weak tax receipt recovery include North Carolina (-3.1%), Nevada (-2.1%), Ohio and Michigan (-1.5%), Utah (-1.3%) and Maryland (-0.2%).

Texas (+6.5%), Tennessee (+6.1%), Florida (+3.9%) and New Hampshire (+1.3%) have below tax receipt gains because they have no income tax which is more sensitive to economic conditions than a sales tax. It works both ways. These states also had relatively small declines in tax receipts in 2008-09.


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