With mortgage money less available, the taxes connected to home buying--not just real-estate taxes but also sales taxes on things people buy for a new home--are drying up. Sales of building materials are down as a direct result of a slowdown in construction and sales of everything from cars to appliances to consumer products are also falling in places where the slump is worst.
While fiscal 2007 was a fairly robust year for revenue collections in most states, the real-estate fallout is likely to be an issue for fiscal 2008, according to Standard & Poor's. The credit rating agency, taking note of a cushion of budget reserves from the previous bountiful years, gave nine states an upgrade in their credit rating or an improved outlook. Only Michigan, where the economy is suffering along with the auto industry, was downgraded.
Going forward, the places that boomed the most are expecting the hardest fall. The pain is being felt from Florida, where lawmakers are seeking ways to close a billion-dollar budget gap, to Ohio, where a growing inventory of houses for sale is slowing some sales tax collections. The building bust is also affecting tax collections and budgets in California, Minnesota and Virginia.
