State Budgets Recovering in Most States

Budgets in most states are continuing a “modest, slow” recovery from the Great Recession, with revenues meeting expectations in 35 states and most states expecting balanced budgets through this fiscal year, according to a new report by the National Conference of State Legislatures (NCSL).

Most states told NCSL their fiscal situations are “stable,” and predicted they will be able to attain revenue projections for the remainder of fiscal year 2015. The report relies on data from the fall of 2014.

But 12 states are expecting budget shortfalls, and six states expect to miss revenue projections. Those six are: Alaska, Arizona, Kentucky, Massachusetts, Michigan and Vermont. Five states—Georgia, Maryland, Oklahoma, Texas and Utah—are likely to exceed revenue projections.

“It’s a good news report,” said Arturo Perez, fiscal analyst for NCSL. “It’s a position states want to be in, especially compared to where they were a few years ago. The recovery continues to be there for states, post-Great Recession.”

“The real takeaway is that they (states) are feeling confident enough that most states expect to meet or exceed their forecasts for revenues this year,” he said. “It’s a very strong statement regarding their fiscal health at this point.”

Perez said there was no common thread linking the states that have dimmer forecasts.  

The “Big 3” of state taxation – personal income taxes, general sales and use taxes, and corporate income taxes – all are generating healthy revenues in states where they are levied. Thirty-seven states and D.C. impose all of these taxes. Hawaii, New Mexico and Oklahoma reported higher than expected collections in all three categories.  Only two jurisdictions reported collections below estimates in all three categories – Arizona and D.C. In Arizona, year-to-date collections were 3.5 percent above fiscal 2014 collections, but still $71 million below the forecast, according to the report.

In addition to the “Big 3,” states levy many other kinds of taxes. Severance taxes, which provide substantial income in states with oil and gas resources, were above estimates in three states, below estimates in seven states, and on target in another eight states. Estimates were revised downward in Kansas, Louisiana, Montana and Wyoming. Only North Dakota, site of an oil shale boom, revised its collection target upward.

On the spending side, Medicaid spending is over budget in 14 states, and some states are looking to make up those shortfalls in the coming legislative session. Some of the states where Medicaid is over budget by the most include Louisiana at $170 million over budget, Iowa at $61 million and Mississippi at $99.5 million, the report said.