States Fiscal Trends Indicate Caution about Economic Recovery

Author(s): 
Donald Liebenson
While many state budgets are not fully back to pre-recession levels, fiscal conditions are improving, according to The Fiscal Survey of States, a biannual report published by the National Association of State Budget officers and the National Governors Association.
Governors’ proposals forecast total general fund tax revenues of $690.3 billion in fiscal 2013, 4.1 percent over the estimated $662.8 billion that will be collected in fiscal 2012. States estimate they will end this current fiscal year with total general fund revenues of $11.4 billion, or 1.7 percent over last fiscal year.  While total fiscal 2012 fund revenues will be $17.4 billion below fiscal 2008 levelos, recommended fiscal 2013 budgets forecast that collectively general fund revenues will exceed peak pre-recession levels by $10 billion, the report finds.
Fiscal trends reflect caution at the state level about the strength of the national economic recovery. “Budgets are being squeezed by constrained revenues and increased expenditure pressures, reductions in federal funding, replenishing reserves and providing resources for critical areas that were cut during the recession,” the report finds. States have also been slower to recover from the recession due to the severity of the collapse and the lag time between tax collections.
In addition, state revenue improvement has not been enough to meet the rise in demand for state services and spending over the past two years, leaving states to solve a combined $146.3 billion in budget gaps in fiscal 2011 and 2012. Nine states are projected to have a zero balance in their rainy day funds. Nine states have had to make cuts in higher education in this fiscal year, while seven have made cuts in K-12 programs.  Six states have made cuts in Medicaid.
Fifteen states have resorted to layoffs to counter budget gaps, while 30 states made  targeted cuts.
General fund expenditures are slowing and still $4.6 billion below the pre-recession high of $687.3 billion in fiscal 2008. Half of the states are forecasting lower general fund spending in fiscal 2013 compared to five years ago, but 39 governors are recommending higher general fund spending in fiscal 2013 compared to fiscal 2012.

Source: http://www.millionairecorner.com/article/states-fiscal-trends-indicate-caution-about-economic-recovery

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