States Of Despair

Although I hadn’t intended to do so, this week’s column will serve as a sequel of sorts to last week’s. In case you missed my column in our July 13 e-newsletter, I pointed that agriculture on the whole was having a pretty good financial year in 2010, with crop and input prices relatively stable and manufacturing picking up. I went on to tell how a new downturn in the general economy could derail all this revenue progress going forward.

Of course, there is another much more pressing danger facing agriculture today – severe state budget crunches. Although huge states such as California have gotten most of the popular press focus when it comes to budget shortfalls, states in the nation’s heartland are also in financial trouble.

Take Illinois, for instance. A few weeks ago, Illinois Governor Pat Quinn chopped $1.4 billion from the state’s budget. The state also embarked on a series of bond sales expected to net another $2 billion or so in funds. However, even with these measures in place, analysts say that Illinois still has somewhere around $6 billion in unpaid bills sitting in its payables department.

Unfortunately, other states are in similar budget shortfall situations. How this might impact ag retail remains to be seen. But as one of the only industries enjoying some increased sales right now, state lawmakers are bound to look to our market as a potential source of new revenue.

“No doubt states will be looking for any and all sources of income,” says Wendell Stratton, owner of Stratton Seed Co. in Stuttgart, AR. “The ag sales tax exemption in our state always comes up in that discussion.”

Moving forward, ag retailers will need to stay in close contact with their state government representatives and state trade associations. If there is any hint of new taxes coming our way, we must be prepared to fight them and keep the narrow profit margins most in agriculture see from being seized.

It would be a shame if the state legislators, looking for new revenue streams, killed agriculture’s recovery before it truly sinks in.

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