New Reports Gauge State Fiscal Outlook, National Economy

Two reports released during this past week examine state fiscal conditions for FY 2002 and a slowing national economy following the terrorist attacks on Sept. 11.



State Fiscal Outlook for FY 2002: October Update

State Fiscal Outlook for FY 2002 offers a look at the fiscal condition of all 50 states, based on information collected from legislative fiscal directors in mid to late October. A comprehensive survey conducted by the National Conference of State Legislatures (NCSL), the report covers the revenue and expenditure situation through the beginning of FY 2002, state plans to address budget shortfalls and the budget forecast for the remaining fiscal year.



Some highlights included in the report:

• State revenue growth has greatly slowed in as many as 44 states where revenues were under forecasted levels at the beginning of FY 2002.
• Spending is exceeding budgeted levels in 19 states; overspending in some program areas is expected in another seven states.
• Budget cuts or holdbacks are being considered by 28 states.
• Rainy day funds or tobacco settlement funds may be used by 20 states to balance FY 2002 budgets.
• Hiring freezes, cancellations of capital projects, and travel restrictions have been implemented by 14 states.

Unlike the following report, State Fiscal Outlook for FY 2002 does not speculate on the effects that the September 11 terrorist attacks will have on the economy. Similar to the following report, however, State Fiscal Outlook for FY 2002 uses tables to show a comparison of states in many of the bulleted areas above. The report is available through NCSL: http://www.ncsl.org/programs/fiscal/sfo2001.htm

The Outlook for State Tax Revenues

Commissioned by the National Governors Association (NGA) and authored by Mark Zandi of Economy.com, The Outlook for State Tax Revenues reports that before the terrorist attacks, state and local tax revenue growth already was at the slowest rate since records started being kept in the 1950s. The study concludes those revenues are expected to be flat this fiscal year and may "very well turn down for the first time on record."



Working under several different assumptions, the report outlines a "baseline outlook" predicting that the U.S. economy will suffer through a recession that will extend at least through the end of 2001. Eleven states already are said to be in recession, and 68 metro areas are projected to have employment declines of up to 2.4 percent in 2002.



An alternative outlook assumes there are no further substantive terrorist attacks but that it takes longer for a sense of personal safety to be re-established. A second alternative is based on the assumption that no defining event in the U.S military effort may contain global terrorism and that additional terrorist attacks continue.



The Outlook for State Tax Revenues was delivered last Thursday to the U.S. Senate to help Congress understand the stress state budgets are experiencing. The report offers several tables, including a state-by-state comparison of and percent change of gross state product between August 1 and October 1, and is available online: http://www.nga.org/nga/newsRoom/