May 3 Improving revenue will lead more than half
of the 50 U.S. states to end this fiscal year with mild
surpluses, according to a report released on Th ursday that
showed the economic recovery is finally reaching their budgets.
The National Conference of State Legislatures reported that
29 states and the District of Columbia project their fiscal 2012
revenue will exceed budgeted obligations by $9.1 billion. For
most states, the fiscal year ends June 30.
"Throughout the Great Recession, spending estimates often
proved to be too low and revenue estimates too high, resulting
in substantial state budget gaps," the NCSL said in its report.
"Spending requirements have been relatively stable, and
revenues continue to grow, and in some cases have returned to
pre-recession levels," it added.
In four commodity-rich states - Alaska, Indiana, Montana and
Wyoming - the surpluses will represent 10 percent of their
general fund budgets.
Almost all of the states with surpluses, 21, will put some
of the money into reserve funds, and 19 plan to use it in their
next budgets. Two states, Arizona and Indiana, will pay off some
debt and Indiana will also put part of its surplus into its
employee pension fund. Many will also use the money for capital
REVENUES INCH UP, AS DOES HEALTHCARE SPENDING
Only nine states developed new shortfalls this year,
totaling $6.8 billion, and 16 states and the District of
Columbia project gaps for next fiscal y e ar of $16.2 billion.
Because all states except Vermont must end their fiscal
years with balanced budgets, shortfalls lead them to hike taxes
or cut spending. At the height of the recession, revenue
declines were so large and rapid that many states had to call
emergency budget sessions to wipe out new gaps.
Although the economic recovery began in 2009, states have
still struggled over the last few years, laying off workers and
slashing spending. While the recession was fairly uniform,
sparing just a few states, the recovery has been uneven, making
policymakers nervous that improvements will not last.
NCSL reported that one-third of states expect in this
fiscal year to return to the revenue peaks they reached before
the recession, while "many others do not expect a return for at
least three years or longer."
A recent report from the Rockefeller Institute of Government
said that, on the whole, states have reached those pre-recession
highs, but individually many places still lag.
State lawmakers are also concerned about high unemployment,
spending cuts from the federal government, demands for public
programs and the global economy, NCSL found.
"The tenor from legislative fiscal directors is one of
cautious optimism as state budgets slowly but steadily improve,"
the report said.
It found that tax collections have met or exceeded
expectations in most states but that "performance was uneven
across tax categories," with sales taxes and corporate income
taxes generally stronger than personal income taxes.
Altogether, 12 states and the District of Columbia brought
in personal tax collections that were higher than projected,
even after three had revised their estimates upward, and 16 met
their expectations for personal income taxes.
That compares with 23 states bringing in more sales taxes
than expected and 16 "coming in on target." Sales taxes
represent 32 percent of total state revenue, although five
states do not levy the tax.
Nonetheless, many states have had spending overruns this
year, largely because of Medicaid. States administer the
healthcare program for the poor with federal reimbursements, and
as health costs rise and the number of unemployed people turning
to the program remains high, their spending on it has grown.
Medicaid and similar programs are over budget in 10 states,
NCSL said, noting that at this time last year, 20 states were
spending more than expected on healthcare.