This is another sign of growth creeping in.

The States will be fine with a bit more GDP growth, and if they maintain their equity allocations their pension funds will all recover when equity prices double over the next few years.

With strong productivity growth throughout the recession, there is a lot of catch up down the road as the ongoing 8%+ deficits fill the spending gaps and restore the financial equity that will also support a subsequent credit boom that begins with the ‘get a job buy a car’ accelerator.

Unfortunately we still haven’t addressed our energy consumption issues, and we remain highly vulnerable to arbitrary Saudi price hiking.

Nor have we taken sufficient measures to be able to grow GDP without a substantial corresponding increase in energy consumption in general.

But that’s another story, at least for the near term.

Tax Revenue Creeps Up, but Can’t Fill State Budget Gaps

July 27 (Reuters) – State tax revenue is improving, but only slightly, and may not be enough to end steep spending cuts or replace the loss of assistance from the federal stimulus plan that expires in December, according to a report Tuesday.

The National Conference of State Legislatures said states faced a collective budget gap of $83.9 billion when creating their budgets for fiscal 2011, which for most began on July 1.

Officials surveyed by the group, which represents state lawmakers, said revenue was beginning to pick up or at least slow its rate of decline. Nearly every state expects tax collections this fiscal year to surpass last year’s.

“For the first time in a long time we’re seeing some slight improvement in the state revenue situation,” Corina Eckl, the NCSL’s fiscal program director, said in a statement accompanying the report. “But glimmers of improvement are tarnished by looming problems.”