Nvember 18, 2010; Source: Stateline.org | Like nonprofits that send out their end-of-year fundraising pitches, state governments are hoping that the fourth quarter brings their budgets “glad tidings” due to sales taxes generated by holiday shopping. As nonprofits know all too well, most states have lost plenty of potential tax revenues due to plummeting sales taxes.

Did you know that sales tax collections comprise a third of state government revenues? Will Santa Claus stuff state budgets with an upturn in sales tax revenues during November and December? Stateline reports that sales tax increases have been “leading the recovery in most states,” with 27 states reporting increases in monthly sales tax revenue this year compared to last.

However, it is also true that sales tax revenues took such a huge hit during the Great Recession that a 2010 holiday season uptick will not undo years of sales tax losses. Even those states with increases have to dedicate the increased revenue to replace stimulus funding, which ends shortly and will clearly not be resuscitated. Estimates of fiscal 2011 state budget deficits are reported in the press daily, with California well in the lead facing a $25 billion deficit that could continue to grow.

It is difficult to imagine that nonprofit service providers will feel in their budgets their states’ upticks in sales tax revenue, especially if the projected increases do not materialize. Will nonprofits be “joyful and triumphant” come New Year’s? Some may, due to successes in their holiday fund-raising requests, but most can only continue to be apprehensive about whether anything will materialize from improving state government budget dynamics.—Rick Cohen