December 15, 2008 / 10:39 PM / 11 years ago

States worry about slumping retail sales revenues

SAN FRANCISCO (Reuters) - Todd Gerardo’s layoff means work for someone else in Arizona, where state officials this month will have more than doubled their staff with new employees for processing unemployment benefits.

Gerardo, of Gilbert, Arizona, said he knew his days were numbered as a car salesman when he managed to make only minimum wage last month. His dealership let him go on December 3.

“The economy is just so bad that for the first time in my life I just wasn’t selling any cars,” Gerardo, 42, told Reuters while waiting for a skills assessment at a state office that helps job seekers. “The business is just not there anymore.”

Some 37,000 others in Arizona who filed first-time claims for jobless benefits last month would agree business is bad and state officials say hard times are spreading quickly from the state’s battered homes market.

“It’s no longer related to housing woes but has become a broad-based decline,” said a Dennis Doby, a labor market specialist at the Arizona Department of Commerce.

In October, Arizona shed 70,900 jobs from a year earlier, marking a steep 2.6 percent fall in its nonfarm payrolls and eighth consecutive month of job losses. Only one other state, Rhode Island, has lost a greater percentage of its nonfarm jobs over that 12-month span, Doby said.

State revenues are shrinking fast too. Arizona now faces a state budget gap of $1.2 billion from the remainder of its fiscal year, which points to “draconian” spending cuts, said Marshall Vest, an economist with of the University of Arizona’s Eller College of Management.

He noted that other states whose once-hot homes markets have come dramatically undone also will slash spending. “Arizona’s economy is leading the rest of the country into this recession, just like Nevada, California and Florida — all states with housing bubbles.”


The National Conference of State Legislatures says states face a collective budget gap of at least $97 billion over the next 18 to 24 months.

California’s budget troubles are responsible for a large share of that estimate, underscoring how, just as in Arizona, housing woes are bleeding into the state’s broader economy.

Gov. Arnold Schwarzenegger has said the state’s government is only weeks away from running out of cash if lawmakers fail to close a current state budget shortfall of nearly $15 billion. “If we don’t put aside our ideological differences and negotiate and solve this problem we are heading toward a financial Armageddon,” he said.

Orange County Supervisor John Moorlach said local government budgets across California likewise are buckling as revenues shrink amid sagging retail sales and properties are reassessed at lower values as the housing slump presses on.

“Everything is hitting at the same time,” Moorlach said.

Declining automobile sales are of special concern to both cities and the state, which derives license fees from the sales, said Mayor Alan Autry of Fresno, California’s sixth-largest city. “It’s a big hit,” he said.

Nevadans are also steering clear of vehicle dealerships, the state’s third-largest source of retail sales revenue.

“We’ve had double-digit declines in our taxable sales related to automobiles for over a year,” said Andrew Clinger, Nevada’s budget director. He noted he expect the state to be more than $1 billion short of its expected revenues for its next two-year budget cycle starting in July.

In Florida, state economists forecast about $2.3 billion less in current fiscal year revenue as sales tax collections sink due to falling automobile sales and lackluster tourism, a decline compounded by the state’s housing slump.

Lawmakers say Florida is facing its greatest financial challenge since the Great Depression. “There has been a tectonic shift in the structural underpinnings of our economy,” state Senate President Jeff Atwater told colleagues last week.

Additional reporting by David Schwartz in Gilbert, Arizona and Michael Peltier in Tallahassee, Florida; Editing by Dan Grebler

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