June 24, 2009 / 12:54 PM / 10 years ago

FACTBOX: U.S. states in balancing act on budgets

NEW YORK (Reuters) - U.S. states are resorting to some unusual measures to balance budgets as the economic recession decimates their revenue.

States are forbidden from running a deficit, forcing political leaders to resort to spending cuts or tax hikes during times of stress.

Forty-six U.S. states face fiscal 2010 budget deficits totaling at least $130 billion, according to the Center on Budget and Policy Priorities. During the current fiscal year, 42 states were hit with mid-year shortfalls of a combined $60 billion, according to the Washington think-tank.

That compares with the $1.8 trillion deficit run up by the federal government, which is allowed to operate with a deficit.

So far this year, 23 states have enacted tax increases and another 13 are considering similar moves.

Here are some of the measures that have been enacted or proposed:

* Prison Cuts

Colorado, Kansas, Michigan, North Carolina and Washington have closed prisons this year as a cost-cutting measure.

New York State and Kentucky changed sentencing laws and bolstered substance abuse programs to keep more drug offenders out of prison. New York expects its changed regulations to save the state about a quarter of a billion dollars a year.

The U.S. has the world’s largest prison population with one in every 31 adults in the corrections system, which includes jail, prison, probation and supervision. States spent a record $51.7 billion on corrections in fiscal 2008.

* “Sin” taxes

Arkansas, Colorado, Hawaii, Florida, Mississippi, Kentucky, Rhode Island and Vermont have increased tobacco taxes.

Wyoming and Maine changed the method for taxing tobacco products to base them on weight.

New York raised taxes on beer, wine and cigars.

Kentucky ended its sales tax exemption on alcoholic beverages.

California is mulling legalizing marijuana and charging a $50-per-ounce tax on it along with the state’s sale tax.

California lawmakers have further proposed increasing sales taxes on sexually-explicit content.

Virginia is considering taxing hotel movie rentals.

Georgia is mulling charging customers at erotic dance bars a $5 “pole tax.”

South Dakota increased taxes on gaming proceeds.

* Personal income and sales taxes

New York and Hawaii have increased taxes for the wealthy.

California increased personal income taxes by 1 percent.

California increased the sales tax by 1-cent.

Kentucky applied sales taxes to digital products, such as software and cellphone ring tones.

Maine extended its sales tax to include amusement parks and sporting events, as well as maintenance and service transactions, including auto repair and dry cleaning.

Nevada increased its sales tax by 0.35 percent.

Vermont made changes to its income tax structure that eliminates an exemption on capital gains income and caps the amount of state and local income taxes that can be deducted from federal adjusted gross income.

Virginia raised income tax revenue by restructuring a credit for land preservation.

New York raised taxes on wireless devices and increased registration fees for motorcycles, cars and boats, hunting and fishing licenses and introduced a saltwater fishing license fee. It also added a new 5-cent beverage deposit on bottled water.

* Business taxes

Iowa and Maryland scaled back business tax credits.

Kansas suspended its film production tax credit for two years.

New York restructured business tax benefits in its “Empire Zone” program.

Virginia expanded its corporate income tax to include investment income from real estate investment trusts.

Nevada restructured its business payroll tax.

* Court fees

Florida, Georgia, Iowa, Minnesota, Nevada and Utah raised court fees.

* Source: Reuters reports, Stateline.org, a nonprofit, non-partisan news service sponsored by the Pew Center on the States, the Center on Budget and Policy Priorities, a non-partisan think tank.

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