Fed Dollars Overtake Taxes as States' Top Income Source

Federal money exceeds revenue from major taxes for first time ever
By Gabriel Winant,  Newser User
Posted May 5, 2009 11:44 AM CDT
In this 2008 file photo, Minnesota Gov. Tim Pawlenty addresses the media following the state budget forecast announcement at the State Capitol in St. Paul.   (AP Photo)
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(Newser) – For the first time, state governments are receiving more money directly from the federal government than they collect in sales, property, and income taxes, reports USA Today. As the economic downturn saps tax revenue, stimulus money has filled the gap. Says an analyst, “This has more to say about the severity of the recession than anything else.”

But eventually, the federal dollars will dry up. States are counting on a tax rebound by 2012, when the stimulus starts to peter out. Conservatives worry that the stimulus just postpones an eventual reckoning. Says an Indiana Republican, “This money isn’t manna from heaven. It comes with a price.”