Sales Tax Revenue Down

October’s reports on declining sales tax revenues have shown that the state of Texas is still suffering from consumer spending contractions.  Sales tax revenue has declined a full 15 percent statewide, 17 percent in Fort Worth with Dallas fairing a little better at a 5.3 percent decline.  An unrelenting string of job losses, elevated long-term unemployment and increased vulnerability to foreclosure have caused many consumers to spend more cautiously than many economists had expected.

Many analysts fear that the pronouncements that the recession is ending are premature and not in line with reality.  While the number of job losses have gone down during a few months this year, the nation has not experienced a significant increase in job creation, leaving many workers unemployed for one or even two years.  Even when they are able to find new work, many unemployed workers take jobs that pay significantly less and/or are only part-time or temporary.  The result is that the decline in consumer spending and consequently sales tax revenue may be long-term forcing many municipalities to consider service cuts as they adjust to the new reality.

Unfortunately for the nation’s cities, sales tax and property tax revenues are the lifeblood of communities.  When those tax revenues decline it can spell disaster for city budgets which impact safety and quality of life. Many cities have been forced to cut the police force and even firefighters to bring their budgets in line with declining revenue.  These changes have left many cities more vulnerable. If the foreclosure crisis and job crisis continues we could experience revenue declines that will send some cities (and even some states) into bankruptcy.