Current Issues in Economics and Finance
Second District Highlights

The Recession’s Impact on the State Budgets of New York and New Jersey

June/July 2010Volume 16, Number 6
JEL classification: H70, H71, H72

Authors: Richard Deitz, Andrew F. Haughwout, and Charles Steindel

In the wake of the most recent U.S. recession, both NewYork State and NewJersey have faced multibillion-dollar budget gaps. An analysis of the makeup of their budgets reveals that the states’ heavy reliance on personal income taxes—particularly from high-wage earners in the finance sector—has exacerbated revenue shortfalls. To close their budget gaps, New York and New Jersey have had to make difficult choices about tax increases and service cuts. In the future, the states might take steps to avert such budget quandaries by establishing “rainy day” funds or restructuring taxes to make them less sensitive to the business cycle.

PDF full articlePDF 11 pages / 308 kb
Interview with authorsPDF
Podcast
Press release