States' stimulus boost starts to shrink in June. Currently getting a third of receipts from the Fed.

[dkf]

State and local government finances continue to slowly improve, but the outlook is cloudy because federal aid to states will start to shrink in about nine months.

Revenue for states, cities, school districts and other governments increased 4.3% during the three months ended Sept. 30 compared with the same period a year earlier, the Bureau of Economic Analysis reports. Spending rose 2.9%.

Revenue has risen in every quarter for two years. The nation's state and local governments as a whole have run surpluses for the last year, helped by cutting jobs and other expenses.

What's made the biggest difference is a massive infusion of federal aid from the economic stimulus program approved in February 2009.

Federal money is now the biggest source of cash for states and local governments, larger than income, sales or property tax collections.

--stimulus $539.3B, property taxes $436.6B, sales taxes $427.3B, income taxes $262.3B

http://www.usatoday.com/news/nation/2010-11-02-statetaxes02_ST_N.htm