With everyone focused on municipal developments following the recent muni scare (although with muni outflows dropping to the lowest in months per the latest ICI data, it seems the panic may be over... of course this is at the expense of equity inflows as we had speculated some months ago) the latest news out of the Lucio Report are likely to be carefully scrutinized by the municipal investment community. According to Reuters: "Fewer U.S. states in February hit the mark on forecasting receipts from withholding taxes compared to January, a sign that a recent rebound in revenues may be slowing down, an economic newsletter said on Thursday." The summary from the report: "Around the country results were mixed," said the Liscio Report, which takes monthly surveys of states' tax receipts." Will this add more fuel to the Whitney fire? Look for inflection points in the MUB to find out.
In February, 74 percent of the states surveyed met or exceeded their tax forecasts, down from 82 percent in January and from 79 percent in February 2010.
"Our contacts in two ... states thought receipts may be losing momentum -- leading one to say the economy just doesn't know what it wants to do these days," the newsletter reported. "Although these states will likely end the fiscal year at target, receipts probably won't keep up with the pace set earlier this year."
The housing bust, financial crisis and recession hit states' revenues on all fronts, creating budget problems. Even after three years of spending cuts, tax hikes and getting help from the federal government, states still face budget gaps totaling $175 billion.
At the end of 2010, revenues began to come back, but many governors, state legislators and economists worry that the pace will be too slow to have a significant economic impact.
Surely, all these are signs of a stable and improving economy...on the back of $3+ trillion in monetary and fiscal stimuli.