NCSL: States' Recovery Is 'Slow and Steady'

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In the midst of a sluggish economic recovery and looming budget cuts in Washington, most states are reporting they expect stable fiscal situations through the first few months of fiscal 2013, according to a recent report from the National Conference of State Legislatures.

The NCSL, a bipartisan organization serving state legislators, released its "State Budget Update: Fall 2012" report on Tuesday, which includes findings on revenue, revenue outlook, and spending for the first quarter of the fiscal year, beginning July 1, 2012.

The report is based on a survey of state legislative fiscal officers from all 50 states and the District of Columbia.

"State finances are improving, albeit at a slow and steady pace," Arturo Pérez, program director of NCSL's fiscal affairs program, said in a telephone conference on Tuesday.

"Revenues are moving in the right direction for states, spending is generally stable or confined to what states have budgeted, and the outlook is relatively stable for states," he said, adding that there are still some concerns out there.

The majority of states reported either on-target or above-target tax collections of the three major taxes — personal income, sales, and corporate income.

Only Idaho, Maine, and New Jersey reported all three tax categories as performing below forecast.

For personal income taxes, which account for nearly 34% of state own-source revenues, 12 states and Washington D.C. reported that collections exceeded estimates and 15 reported that they were on target.

Collections came in below target for 13 states, including Delaware, Maryland, Mississippi, and Rhode Island. Nine states do not levy a broad-based PIT.

The majority of states also reported stable or positive results for general sales taxes collections, which account for about 31% of state own-source revenues. Sales tax revenues were reported at below estimates for 15 states, including Idaho, Connecticut, and New York. Five states do not levy a state sales tax.

Only ten states and Washington, D.C. reported below-estimated corporate income tax collections, which account for 5% of state tax collections, on average. Six states do not levy a corporate income tax.

Looking ahead, the majority of states — 33 and Washington, D.C .— have stable outlooks for revenue collections for the remainder of fiscal 2013, meaning they believe they will meet projections. Six states have optimistic outlooks about future revenues, meaning they believe collections may exceed projections.

"For most states, revenues continue their slow climb out of the trough of the recession, and the outlook for the remainder of the budget year indicates continued improvement," the report said.

"However, in a change from last year when no states reported pessimism, a handful of state officials believe they are unlikely to meet the revenue forecast in FY 2013."

Alaska, Maine, New Jersey, and New York have pessimistic revenue projections for 2013. New York and New Jersey cited the potential impact on state revenues from Hurricane Sandy, Pérez said.

The NCSL report also took a look at state spending, finding that, generally, states are in line with budgeted estimates. However, more states are facing spending overruns than during the same period last year.

This year, 18 states are reporting that at least one area of spending is significantly over budget in FY 2013, compared to 11 states last year. No areas of the budget are overspent in 22 states, and 11 states indicated that it is "unknown" if any program areas are over budget.

Areas that states reported as over budget include Medicaid and other healthcare programs, education spending, and corrections programs.

"The big picture, or the takeaway, is that it's a stable situation," Pérez said. "Good, not great, would probably be a good summation at this point of the general picture for states."

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