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Bloomberg News

U.S. State, Local Revenue Rises 4.1 Percent in Third Quarter

December 22, 2011

(Updates with collection figures in second paragraph.)

Dec. 20 (Bloomberg) -- U.S. state and local-government tax revenue rose 4.1 percent in the third quarter, for the eighth consecutive gain, the Census Bureau said.

The collections rose to $292 billion from $280.5 billion a year earlier, the bureau reported today. The increase was driven by property, sales, and personal income taxes. Corporate-income levies fell for the first time since the third quarter of 2010.

The revenue gains mark the longest stretch of growth since 2008. The improvement is easing pressure on governments that have struggled with budget deficits since the 18-month recession began four years ago. Rising collections may leave states with extra cash and avert the need for more spending cuts, barring new setbacks to the U.S. economy.

The collections for the July-through-September quarter, the first three months of the budget year for most states, outpaced forecasts officials assumed when drawing up their spending plans.

State revenue rose by $9.4 billion, or 5.6 percent, to $178.2 billion. That exceeds the 1.6 percent annual gains that states are forecasting for the current budget year, according to the National Association of State Budget Officers.

Mid-Year Deficits

With more money flowing in, fewer states are facing budget deficits this budget year. Only four states -- California, New York, Missouri and Washington -- are reporting such shortfalls, compared with 15 a year ago, according to the National Conference of State Legislatures.

The improvement has helped fuel a rally in the $3.7 trillion municipal bond market, where speculation about defaults diminished as public officials took steps to rein in budget shortfalls. Last week, Fitch Ratings said it lifted the negative outlook it put on U.S. state bond ratings, in part because of the lower deficits projected for next year.

The increase in property-tax levies also marked an improvement for local governments, whose revenues were diminished by tumbling home values.

Property tax collections rose 1 percent in the quarter after falling during the previous three quarters, the bureau said.

--Editors: Mark Tannenbaum, William Glasgall

To contact the reporter on this story: William Selway in Washington at

To contact the editor responsible for this story: Mark Tannenbaum at

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