(Corrects 2nd paragraph to show revenue increase forecast at
3.2 percent, not 4.6 percent)
WASHINGTON, June 12 Most U.S. states will start
their new fiscal year next month with budgets that provide some
breathing room both for spending and revenues, according to a
semi-annual report released by the National Association of State
Budget Officers on Thursday.
General fund spending, which represents 40.3 percent of
states' budgets, is expected to increase 2.9 percent in fiscal
2015, which for most states begins on July 1. At the same time,
revenues are forecast to rise 3.2 percent, according to NASBO.
Although recovery from the state fiscal crises caused by the
2007-09 recession has been slow, states' spending and revenue
gains have outstripped inflation.
"For many states, this has presented an opportunity to
accelerate fiscal progress," NASBO said. "Governors in most
states are proposing to increase spending in fiscal 2015 by more
than the current rate of inflation, bolstering core services
such as K-12 education and higher education."
In general, though, spending proposals "have been put forth
with caution," NASBO said, as it warned that "growth in personal
income tax collections in fiscal 2015 may be hampered by
States are considering cutting taxes and fees by $2.5
billion next fiscal year, although more than half of governors
have proposed leaving taxes untouched. Florida, Minnesota, New
York and Ohio are considering the biggest tax reductions, while
governors in Delaware, Massachusetts and New Jersey are
considering the most substantial increases.
This fiscal year, states cut taxes and fees by $2.1 billion
after raising them by $6.9 billion the previous year.
In fiscal 2013, a one-time surge of revenue resulting from
federal tax code changes brought states' reserves up to a
healthy level, representing more than 10 percent of general fund
expenditures. Their collective $73.5 billion of ending balances
was a record high, NASBO said.
The balances, though, declined this fiscal year as states
used reserves to deal with slower revenues and they will likely
end fiscal 2014 at $63 billion, or 8.6 percent of expenditures.
Governors have proposed further drawing down balances to $55.4
billion in fiscal 2015, or 7.4 percent of general fund
The fastest growing expense for states during the last few
years has been Medicaid, the healthcare program for the poor
partly paid for by the federal government. This year, Medicaid
spending likely grew a total of 13 percent, with the states'
contributions rising 5.9 percent and federal funding increasing
18.3 percent. The reform law known as Obamacare expanded the
qualifications for enrollment in Medicaid and also put in more
federal dollars for the program.
In fiscal 2015, states expect Medicaid spending to grow 7.6
percent in total, with the state side increasing 5.8 percent and
the federal side 10.2 percent. States also forecast that the
program's enrollment will continue to grow, by 8.9 percent, next
fiscal year, according to NASBO.
(Reporting by Lisa Lambert; Editing by James Dalgleish)