BOS 2012


Table of Contents

Chapter 1 » State Constitutions

Chapter 2 » Federalism and Intergovernmental Relations

Chapter 3 » State Legislative Branch

Chapter 4 » State Executive Branch

Chapter 5 » State Judicial Branch

Chapter 6 » Elections

Chapter 7 » State Finance

Chapter 8 » State Management and Administration

Chapter 9 » Selected State Policies and Programs

Chapter 10 » State Pages

Since 2006, Puerto Rico has suffered one of the worst recessions of its history while simultaneously facing severe fiscal distress. Reforms made by Gov. Luis G. Fortuño, elected in 2008, have controlled the largest proportional deficit among the states. Puerto Rico’s pro-growth reform agenda has since been touted as a model for addressing fiscal and economic problems at the state and federal level.

The reach of the Internet into the lives of Americans, particularly in the area of commerce, continues in near-limitless fashion and will, undoubtedly, expand even further in the future. The Internet, however, has exposed a gaping structural chasm in state tax and revenue systems that will only continue to widen unless policymakers, primarily at the federal level, initiate remedial action. 

State tax performance since 2008 shows that effects of recessions on revenues can last five years or more. Policymakers planning for potential revenue shortfalls must consider relatively long time periods. This article addresses two key revenue policy issues. First, it provides a brief summary of state tax revenue performance during the past several years, with a focus on how collections stand relative to their previous peak. This section shows the relative revenue performance for state governments in aggregate since 2008. Second, it describes key sales tax issues associated with the dramatic movement towards digitization and identifies some policy options.

Fiscal conditions began to improve for states in the 2011 fiscal year. State revenue collections grew by 6.4 percent and state general fund spending increased by 4 percent following two consecutive years of declines. Additionally, the number of states making midyear budget cuts dropped from 39 states in fiscal 2010 to 19 states in fiscal 2011. In the 2012 fiscal year, states are expected to continue their recent improvement with both state revenues and state spending projected to grow. Fiscal conditions, however, remain below pre-recession levels in many states even with the recent increases. States will have to continue to make difficult decisions in the 2013 fiscal year and beyond as they contend with increased spending demands, slowly recovering revenue collections, uncertainty regarding future federal funding and long-term liabilities including pensions and retiree health care costs.

State courts in 2011 continued to face acute problems associated with contention over judicial selection, unrealistic budget allocations and attacks on the legitimacy of the state court’s role as arbiter of the constitutionality of state laws. Sound leadership is a key ingredient to overcoming these and other pressing challenges. Steps taken to strengthen and reinvigorate judicial leadership were among the more newsworthy developments of 2011. Those steps included efforts to enlist new understandings of what compels people to obey the law in order to better guide court management and court reform.