WASHINGTON — Total state spending has reached its fastest growth since before the recession,
Total state expenditures, composed of general funds, other state funds, bonds and federal funds, are estimated to increase 5.7% in fiscal 2014, compared to a 2.2% increase in fiscal 2013 and a 1.1% decline in fiscal 2012. Excluding bonds, the state funds are estimated to grow by 4.8% in fiscal 2014.
Over the past three years, spending from states' own revenue sources has moderately grown these years, while spending, including all states and federal funds, have shown more volatility because of the impact of federal funding changes.
"The large increase in total state expenditures doesn't mean that states are flush with cash because the monies they get from their own fund sources have only increased slightly due to modest economic growth," said Scott Pattison , NASBO's executive director. "The increase seen in total state expenditures is heavily tied to increased federal Medicaid funds so states don't actually have a lot of additional money to fund other priorities like education or infrastructure."
Despite an estimated decline of $3.4 billion on all other federal funds to states, federal Medicaid funds to states increased as much as $41.8 billion in fiscal 2014. Medicaid is estimated to account for 25.8% of total state spending, up from 24.5% in the prior fiscal year, making it the largest component of the total expenditures. Elementary and secondary education is estimated to come in second, representing 19.5% of the total state expenditures.
Nearly all areas of state spending, including elementary and secondary education, higher education, total corrections, and total transportation, are estimated to grow in fiscal 2014, at 4.1%, 3.7%, 4.0% and 4.2%, respectively. Total public assistance, as an exception, increased 3.1% in fiscal 2013, but is estimated to decline 1.4% in this fiscal year.
Since the end of the economic downturn, total state expenditure growth levels have fluctuated largely due to the ebb and flow of federal funds to states, the report noted. Due to increased spending demands, recent state revenue volatility, and the uncertainty of federal fiscal policy in the future, state spending of both short- and long-term remains a concern.
"However, there are indications that state fiscal conditions will continue to improve along with growth in the national economy," NASBO concluded in the report.
