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US States Forecast Highest Tax Revenue In 5 Years

Others states are seeing less improvement. Iowa, Illinois and Arkansas are among those forecasting small increases.

And even though California is forecasting much higher revenue, much of that is coming from a tax increase. The state is struggling to close a $16 billion budget deficit and is considering cutting programs.

So are many other states. Aid from the federal government is dropping and demand for health care, education and other services is rising.

About a quarter of the expected gain in revenue comes from proposed tax hikes in 10 states. Fifteen states recommended tax cuts, though not enough to offset the proposed gains.

The gains in revenue are also uneven. Tax receipts in 23 states are projected to remain lower than they were five years ago. The forecasts are based on proposed budgets submitted by governors.

The issue of state and local government job cuts inflamed the presidential campaign last week. President Barack Obama on Friday urged Republicans in Congress to approve legislation he has proposed that would enable more teachers and police officers to keep their jobs.

The president also asserted that the "private sector is doing fine," which drew quick, derisive criticism from Republicans. Mitt Romney, GOP presidential nominee, charged that Obama was "out of touch."

Layoffs are slowing at the state level. State governments added an average of 3,000 jobs a month in the past six months, after cutting an average of 5,200 in the preceding six months. Still, the cuts aren't entirely over: states cut 5,000 jobs in May.

The biggest layoffs have been at the local level, particularly in public schools. Local governments rely on property taxes, which are still declining as property values fall in the wake of the housing bust.

Since August 2008, when state and local government employment peaked, local governments have cut 528,000 jobs. State governments have shed 134,000.

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