May 1, 2018 / 8:13 PM / 10 months ago

U.S. states' 2019 budgets improve but long-term stress persists

NEW YORK (Reuters) - The overall picture for U.S. states’ fiscal 2019 is a hint rosier than in the last several years, but rising volatility and fixed-costs pressures leave doubts about how long the incline will last, a report showed on Tuesday.

Revenue collections for many states have been higher than at the same time last year and tax receipts are also beating 2018 expectations with less than two months left in the fiscal year, S&P Global Ratings said in its annual budget analysis.

A flattening of Medicaid enrollment has also led to an easing in recent state spending.

Except for a handful of outliers, S&P also expects the state sector to wrap up its fiscal 2019 budget process “in a more timely and less acrimonious fashion than it has in recent years.”

While the near-term outlook has improved, rising financial market volatility and the possibility of a trade war also present imminent risks, the report said.

Over the long term, Medicaid, pensions and other so-called “legacy costs” will continue to eat away at budgets, S&P said. An expected downward turn from a nine-year bull stock market will also likely weigh on state budgets, it said.

Reporting by Laila Kearney; Editing by Daniel Bases and Dan Grebler

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