Most U.S. states have enacted budgets that contain only modest spending increases in the next fiscal year, according to a report released on Tuesday by the National Association of State Budget Officers.
NASBO's Fall Survey shows general fund spending by states is forecast to rise 4.1% in Fiscal Year 2016. While the rate of growth is beneath the historical average, NASBO noted that current inflation also remains below historical averages.
"General fund revenue growth was solid in Fiscal 2015, helping to strengthen states' ending balances and bringing total balance levels to an all-time high in actual dollars, though not as a percentage of expenditures," the report said. "However, revenues are expected to grow more modestly and total balances are projected to decline in Fiscal 2016."
For fiscal 2016, 43 states have passed budgets with spending increases compared to FY15 levels, the sixth straight year that states experienced spending and revenue growth. The 2016 budgets show general fund spending rising to $790.3 billion from $759.4 billion in fiscal 2015. In comparison, general fund spending rose 4.5% to $725.7 billion in fiscal 2014.
For all 50 states in 2015, the combined total of general fund spending remained below the Fiscal Year 2008 pre-recession peak, after adjusting for inflation.
For 2016, 30 states have passed budgets with spending gains of less than 5%, 13 states have budgets with spending growth of 5% or more, four states have budgets that cut spending, one state has a budget with no change in spending, while two states have yet to finalize their 2016 budgets.
But while most states continue on a path of steady, modest budget increases, some continue to face significant fiscal challenges, the report stated.
"States vary in their fiscal health due to a combination of economic, demographic and policy factors," NASBO said. "Long-term spending pressures in areas such as health care, education, infrastructure, and pensions continue to pose challenges for many states that will require difficult budgetary decisions."
Additionally, spending pressures for all states on K-12 education, health care, pensions and other critical areas continue to increase, while revenue growth is expected to remain limited.
Enacted budgets show that revenue collections are projected to rise 2.5% in fiscal 2016, significantly slower than the 4.8% growth rate estimated for the previous year.
In conclusion, NASBO said state fiscal conditions continue to be stable, but that fiscal 2016 budgets are cautious, with forecasts for only modest spending gains and smaller revenue growth.
