Government Technology

No Red Ink Showing on State Ledgers


April 12, 2006 By

From Stateline.org:

After weathering the rockiest budget conditions since World War II earlier this decade, states appear to be well on the road to economic recovery and fiscal stability, according to a report available April 10 from the National Conference of State Legislatures.

Because of stronger than expected state tax collections, 42 states will end fiscal year 2006 on June 30 with an estimated total surplus of $28.9 billion, equal to about 5 percent of all state general fund budgets.

However, the report also reflected growing concern among state lawmakers that ongoing state revenues will not keep pace with state spending growth in programs such as Medicaid, leading to deficits in upcoming years. According to the NCSL survey, expenses will exceed revenues in 10 states in fiscal 2007 -- and 19 states in fiscal 2008 -- if spending and collections increase at their current pace.

"The fact that states predict they'll end the year with balances does not mean that their finances are stable in the long term in every case," NCSL Executive Director Bill Pound said in a written statement.

Below Stateline.org summarizes highlights from the 50-state report, including which areas of state revenue are performing best, how states plan to spend a collective $28.9 billion surplus and what budget pitfalls loom in states' fiscal futures.

The report is based on a survey of legislative fiscal directors in all 50 states conducted in March. Free copies of the NCSL survey can be requested by state lawmakers and credentialed media by emailing press-room@ncsl.org. Others can purchase a copy for $30 at www.ncsl.org/bookstore.

Revenue performance
  • Nearly every state reported to NCSL that all sources of state revenue were performing strongly in fiscal 2006.

  • Thirty-eight states have revised upward the amount of state revenue they expect to collect before the end of fiscal 2006. Six states reported revenue increases 10 percent or more above targets. Alaska reported the largest increase -- $1.3 billion, or 50 percent -- because of a surge in energy taxes. New Mexico, Texas and Wyoming also benefited from record energy tax collections.

  • Three states -- Indiana, Wisconsin and New Mexico -- had to reduce their revenue forecasts. However, the reductions were less than 1 percent in Indiana and Wisconsin.

  • Of the 41 states with revised revenue forecasts: 18 reported that tax collections continue to exceed expectations; 18 states reported revenues on target; and only South Dakota fell below its target by 1 percent.

  • Eight states reported that revenue collections have exceeded targets in every major tax category -- sales and use, personal income and corporate income. They are: Arizona, Arkansas, Delaware, Florida, Georgia, Idaho, North Dakota, and Washington. Another eight reported that collections were on or slightly above target.

  • Corporate business taxes exceeded expectations the most. Kentucky corporate income taxes collections were 98 percent above estimates, Nebraska's by 56 percent and Oklahoma's by 38 percent.

  • Personal income taxes were up in most states. Oklahoma and North Carolina reported personal income taxes were up by 5 percent and Oklahoma by 8 percent. Three states -- Minnesota, Ohio and Rhode Island -- reported that personal income tax collections were below forecast.

  • Gaming or lottery revenues were up in Maryland, Nevada and Rhode Island. Gaming revenues were below forecast in Mississippi despite revising expectations after Hurricane Katrina.
Budget surpluses
  • Of the states that planned to spend the surplus funds: 14 reported they would boost funding for higher education; 11 planned to invest in capital expenditures; seven planned to spend extra dollars on transportation projects; five states

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