States Prepare for Tighter Budgets

Several years of record growth in tax revenues are apparently over for many states, according to Fiscal Survey of the States, released jointly by the National Governors’ Association and the National Association of State Budget Officers on Monday.



Just as many corporations are lowering profit expectations and the stock market takes a nose dive, Governors and legislators in many states are preparing for tighter than expected budgets. Most state coffers are expected to grow, however, but at lower than anticipated rates.



“While the data show positive fiscal health through the time period, tightening of budgets will become more apparent when governors present their fiscal 2002 and fiscal 2003 budget recommendations over the next months,” according to the report’s executive summary.



The survey included budget figures from actual fiscal 1999, preliminary actual fiscal 2000 and enacted fiscal 2001. Twenty-nine states responded to the survey.



Among the factors cited for the darkening budget picture are projected lower tax revenues and outlays for Medicaid, which accounts for nearly 20 percent of all states’ budgets.



Spending on public education grew by 9.1 percent from fiscal 1999 to fiscal 2000, as elementary, secondary and higher education investments consumed one-third of all spending from all funding sources and almost one-half of general fund spending.



For the first time, the semi-annual report also examined state budget expenditures on information technology (IT). States’ use of information technology has rapidly increased over the past five years, the report said. The average annual state IT expenditure is $200 million.



IT highlights included:

• Twenty-nine states are partnering with the private sector through agreements and mechanisms that leverage state investments in infrastructure and IT services, particularly those that focus on improved citizen access and service.
• Thirty-one states are providing postsecondary distance learning opportunities, including accredited college courses via the Internet or other interactive venues; and
• Thirty states have implemented IT solutions for streamlining business permitting, regulations, licensing, and reporting that include online transactions, integrated one-stop business assistance, and access to supportive resources.

Some states, most notably California, still see rosy revenues ahead. On Wednesday, California Republicans proposed $3.5 billion in tax cuts in response to an anticipated state budget surplus of $10.3 billion over the next 18 months. The proposal includes $265 million in tax credits to businesses for investments, research and development, and purchases of cleaner-burning diesel fuel engines.

More information on the latest Fiscal Survey of the States can be found at: http://www.nasbo.org or http://www.nga.org