Stateline Story

State Budgets Are Better, but Still Bad, Officials Say

Fiscal experts painted a mixed picture of state budgets Thursday (April 14) during a meeting of the National Conference of State Legislatures in Washington, D.C.

Tax revenues are showing clear signs of improvement, but they are still far removed from their peak levels, according to lawmakers, fiscal directors, staff members and others who attended the meeting. As a result, difficult budget decisions are likely to remain the norm for several years.

"It's like getting a 5-percent raise, which is great, but then finding out your rent went up 10 percent," Corina Eckl, NCSL's fiscal director, told the assembled state officials. "That's where we are in the overall scheme of things."

NCSL next week will release the results of a national survey of state budget conditions, and Eckl previewed some of the report's findings on Thursday.

The biggest takeaway: While many states are exceeding their revenue targets this year, those targets themselves are based on several years of poor collections and, in the meantime, demand for government services, such as Medicaid, has risen. As a result, 26 states surveyed by NCSL say they expect to face a budget gap of 5 percent or more in the coming fiscal year. Fourteen states predict they will face a similar-sized gap in fiscal 2013.

Lawmakers and staffers from around the country described the problem in stark terms.

Ohio revenues have made a strong showing this year, but the progress comes after years of anemic tax collections, deep budget cuts and an evisceration of the state's rainy day fund, said Brian Perera, the finance director of the Ohio Senate. "In fiscal year '09, we had a rainy day fund that was just north of a billion dollars," Perera said. "As of yesterday, it was 89 cents."

He added: "I am very happy that our revenues have clicked back over to the positive side, but we are dealing with the mess that's been left from the last four years."

In Wyoming, the state has a solid revenue picture, but the expected growth of Medicaid over the coming years represents "the monster in the room," Rosie Berger, the chair of the Wyoming House Appropriations Committee, said.

In Massachusetts, the state has fared relatively well during the economic downturn, but budget cuts have hit the neediest populations the hardest, said Representative Jay Kaufman, the chair of the revenue committee in the Massachusetts House.

"From where I sit," Kaufman said, "those people most vulnerable are the ones whose services are cut first."