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The City Café

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At least a dozen states are anticipating significant budget shortfalls in 2008. The biggest crisis is occurring in California where Governor Schwarzenegger has declared a fiscal emergency — after reporting a $4.6 billion revenue shortfall. Schwarzenegger recommended reducing every state program by 10%. One in interesting quote in the article comes from Iris Lav (deputy director of the Center on Budget and Policy Priorities:

“It’s amazing how sales tax revenues are tied to the housing market,” said Iris J. Lav, deputy director of the Center on Budget and Policy Priorities. “People aren’t buying construction materials, people aren’t furnishing new homes. Some states also have real estate transfer taxes.”

Doug Macdonald, ULCT economic consultant, has been saying the same thing. In fact, at our September Annual Conference Doug presented on the cycle of residential development. In this presentation Doug stated that for every $1 billion decrease in residential construction values, taxable sales in Utah could drop by 3%. Utah is not one of the handful of states that is experiencing the budget shortfall this year…but historically Utah has been a year or two behind the national curve. So what can we anticipate in 2009? The way things look right now (with national trends and a slowing local housing market) I would bet on some level of a budget shortfall for the next FY. You can read a couple of recent articles here:

Cycles Happen — November ULCT Newsletter

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