September 2008 proved to be the start of an extremely stressful period for the U.S. economy with a series of decisive events unrelentingly battering American consumers, corporations and every level of government. Early on in the month, the U.S. Treasury Department assumed conservatorship over Fannie Mae and Freddie Mac, the beleaguered for-profit, shareholder-owned companies that were required by government charters to provide low-cost capital to secondary mortgage markets. Soon after, Lehman Brothers, the 158-year old investment bank founded in Montgomery, Alabama, filed for bankruptcy. Then, within weeks, we witnessed the collapse of several other storied American financial institutions.
These disturbing events and the initial defeat of a financial bailout plan sponsored by the Bush Administration in the U.S. House of Representatives in late September caused the Dow Jones Industrial Average (DJIA or the Dow) to careen 778 points downward, the Dow’s largest, single day drop in history. Not only did the 2008 losses extinguish $7 trillion in shareholder wealth, the declines were even more pronounced since they extended into almost every industry with renowned blue-chip companies such as General Motors, Citigroup and Alcoa losing more than 70 percent of their value and all but two of the 30 DJIA industrials (Wal-Mart and McDonalds) falling by more than 11 percent.
How do all these seemingly disparate trends impact state finances? This Special Series Report hones in on the extent to which the 16 SLC state revenue inflows were reliant on the housing and construction sectors between fiscal years 2002 and 2008, sometimes directly and, other times, indirectly. The comparison of revenue data for this seven-year period will facilitate a review of not only the gradual ebb and flow of these categories but also the sharp fluctuations in revenues, including the steep drop-offs experienced in several states that were particularly reliant on the housing and construction sectors for their overall economic performance.