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U.S. states' revenue on track for 11th quarter of gains

Thursday, 25 Oct 2012 | 4:52 PM ET

Oct 25 (Reuters) - America's state governments are on track for an 11th straight quarter of revenue gains, with preliminary data showing an 8.7 percent rise in state tax collections during July and August, according to a study published on Thursday.

But analysts at the Nelson A Rockefeller Institute of Government in Albany, New York, cautioned that state governments were still weathering an unusually slow recovery from the Great Recession and still face fiscal headwinds.

``While state tax revenue is recovering, it remains well below where previous trends would have suggested. Furthermore, recent economic and revenue trends suggest tax revenue may weaken in coming months,'' the study said. ``While the worst may be behind states, they are not out of the woods.''

Using preliminary data from 44 of America's 50 state governments, the Rockefeller Institute analysts cautioned that the strong 8.7 percent rise in revenues from a year earlier may not have held up during September and may yield a lower growth rate for all of the third quarter.

``According to the preliminary data (from the 44 states), personal income tax collections grew by 15 percent and sales tax collections by 6.3 percent,'' the study said.

The institute said state governments in the second quarter had reported a 3.2 percent rise in revenue from April, May and June of 2011. That 3.2 percent rate was an increase from a preliminary 3 percent calculated about a month ago from early reports from 40 states.

Despite the extended run of overall quarterly revenue increases, which came after five quarters of drops in 2008 and 2009, state revenues in the aggregate are 7.7 percent below those of the second quarter of 2008, when adjusted for inflation, according to the study written by Lucy Dadayan and Donald Boyd.