WASHINGTON Dec 20 State and local government
spending grew at a 0.3 percent annual rate in the third quarter,
after 11 straight quarters of contraction, the U.S. Commerce
Department said on Thursday.
The last time state and local spending expanded was in the
third quarter of 2009, at a much more robust rate of 2.2
percent. Then, for nearly three years, spending contracted
sharply, with the biggest drop in the first quarter of 2010 at
States are pinching pennies, keeping spending growth slow as
the economy recovers from the 2007-09 recession and the federal
government sends them fewer funds.
"The recent improvement in the national economy has not
translated to strong growth in total state expenditures," said
the National Association of State Budget Officers (NASBO) in a
report also released on Thursday.
Total state spending likely grew only 0.1 percent in fiscal
2012, the lowest level since the group began tracking state
spending in 1987, NASBO said. Most states' fiscal years end in
June, which means that many have already started fiscal 2013.
The 2007-09 recession caused states' revenues to plunge and,
because all states except Vermont must end their fiscal years
with balanced budgets, many slashed spending, calling special
legislative sessions to make emergency mid-year cuts.
The federal government stepped in to help with the 2009
economic stimulus plan known as the American Recovery and
Reinvestment Act (ARRA), which included the largest transfer of
federal funds to states in U.S. history.
NASBO said state expenditures grew 3.8 percent in fiscal
2010 and 2.8 percent in fiscal 2011, mostly due to the
assistance. By fiscal 2010 federal money made up nearly 35
percent of state spending, compared with 26.3 percent in fiscal
Now that the burst of stimulus money is over, states must
once again shoulder the costs of public programs, even though
their revenues are only beginning to return to pre-recession
levels. Federal funds likely only represented 31.2 percent of
state spending in fiscal 2012 and will continue to shrink, NASBO
"State revenues have not increased as fast as ARRA funds
have declined, leading to a unique situation in which total
state expenditure growth has slowed during the same time that
the national economy has been improving," it reported.
Meanwhile, spending demands continue to grow, particularly
for the Medicaid healthcare program for the poor that states
operate with partial reimbursement from the federal government.
Over the last three years, the portion of state spending
going to Medicaid has risen to 23.9 percent from 22.2 percent.
Many states worry that Medicaid will eat up their budgets, and
leave fewer dollars for other areas.
Spending on education dipped to 19.8 percent in fiscal 2012,
the first time on record that the portion has been less than 20
percent, NASBO said.