July 31, 2008 11:57AM # State Government Spending and Borrowing Is Soaring By [Chris Edwards](https://www.cato.org/people/chris-edwards) --- SHARE The Department of Commerce released second quarter [national income data ](http://www.bea.gov/national/nipaweb/SelectTable.asp?Selected=N)today. The data includes estimates of state and local spending and revenues. (See Table 3.3) Here is what I found comparing the first two quarters of 2008 with the first two quarters of 2007. — State and local tax revenues have grown about 2.1 percent over last year, with personal income taxes up 4.2 percent and property taxes up 4.3 percent. (I say “about” because I estimated the missing data item for corporate tax revenues). — State and local total expenditures have soared 6.8 percent over last year. There are two items of interest here. First,[ leading newspapers have been running stories ](https://www.cato.org/2008/07/24/state-budget-crisis/)in recent months about the horrible cutting and slashing going on in state budgets. With spending growth at about 7 percent, such budget downsizing is apparently not widespread, to say the least. Second, the gap between spending at about 7 percent and revenues at about 2 percent is curious, given that state governments are supposed to balance their budgets each year. The explanation, according to the Commerce data, is that state and local government borrowing is soaring. [Federal Reserve data ](http://www.federalreserve.gov/releases/z1/current/z1r-2.pdf)confirm the state/​local government borrowing binge. See Table D.3. ##### Related Tags [General](https://www.cato.org/general), [Tax and Budget Policy](https://www.cato.org/tax-budget-policy) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).