U.S. states expect tiny revenue increase this fiscal year
WASHINGTON Dec 10 (Reuters) - U.S. state revenues have continued to rise this fiscal year but at a much slower clip than in the prior year, a decrease that could strain state budgets in coming months, the National Association of State Budget Officers reported on Tuesday.
Revenues will likely rise 0.8 percent in fiscal 2014, a small fraction of the 5.7 percent gain in fiscal 2013, NASBO said.
Fiscal 2013 was an unusual year. Many taxpayers sold investments or paid capital gains as they faced the expiration of federal tax breaks in December 2012. That provided a boost for states, which often pattern their tax codes after the federal one.
For most states, fiscal 2014 began on July 1 and December budgetary data is crucial for understanding their current conditions as well as planning for fiscal 2015. Many governors will unveil their budget proposals in January.
"Fiscal challenges from the modest economic recovery are likely to linger, but these setbacks are not expected to cause significant budget volatility for states in fiscal 2014. Overall, state fiscal trends indicate continued modest growth and stability," the report found.
Over the course of fiscal 2011 and fiscal 2012, states had to deal with $146.3 billion in budget gaps, according to NASBO. The income surge in fiscal 2013 helped shrink holes in their budgets.
"However, revenue growth rates are expected to slow in fiscal 2014, which may result in additional budget gaps later in the fiscal year," it added.
Spending growth will outpace revenue gains this year, but will also be more muted than in fiscal 2013. The budget officers found that general fund expenditures will likely rise 3.8 percent in fiscal 2014, compared with 4.3 percent last year.
A New York-based research group that closely monitors states' budgets, the Rockefeller Institute of Government, is also expecting a revenue slowdown.
Overall state tax revenue increased by 9 percent in the second quarter of 2013 from the second quarter in 2012, the 14th straight quarter of revenue growth, the Rockefeller Institute said in a separate report released on Monday. For the calendar third quarter, revenues likely grew 6.1 percent, according to the group's preliminary estimates.
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