WASHINGTON — State budgets are expected to show moderate growth and stability in fiscal 2015, according to the National Association of State Budget Officers'
The projected increases in general fund spending and revenue will make fiscal 2015 the fifth consecutive year of budget growth. The consistent growth over the years has helped states increase spending and reduce budget gaps on a stable basis. As more states recover from the Great Recession, however, they will also face slower spending growth and rising budget costs.
"State fiscal conditions have improved over the last five years, although many of the same challenges remain," said Scott Pattison, NASBO's executive director. "Slow budget increases and financial stability are positive signs, but many states are facing tough choices, with little additional money to meet growing demands and added spending requirements."
Fiscal 2015 for all but four states runs from July 1, 2014 to June 30th, 2015, a NASBO official said.
General fund expenditures are projected to reach $751.6 billion in fiscal 2015, an increase of $22.7 billion or 3.1%, compared to last fiscal year's gain of 4.9%, which was the largest increase in such spending since fiscal 2008. Among all states, 43 are projected to have growth in general fund spending, while seven states - including Alaska, Illinois, Maine, New Jersey, Oklahoma, South Dakota and Wyoming - will have decreases. Mississippi is projected to have the largest increase in general fund expenditures, at 9.1%.
The spending gains will continue to be heavily directed towards K-12 education and Medicaid, NASBO found in its survey. Thirty-nine states have enacted a net increase of $11.1 billion in spending for K-12 education, and 36 states have increased a total of $8.5 billion for spending on Medicaid for fiscal 2015. In addition, 40 states will spend a total of $4.4 billion more for higher education, 35 will spend $1.0 billion more for corrections, and 12 will spend $1.4 billion more for transportation in fiscal 2015. However 12 states are expected to cut spending for public assistance by $600 million.
States also have enacted minimal mid-year spending cuts over the last seven years, indicating a stabilized trend in state fiscal conditions, NASBO noted in its report. In fiscal 2015, $852 million of mid-year budget cuts have been made by seven states, compared to a peak level of $18.3 billion by 39 states in fiscal 2010, $1.3 billion by 11 states in fiscal 2013, and $1.0 billion by seven states in fiscal 2014, respectively.
However, mid-year budget cuts still appear smaller than fiscal 2009 and fiscal 2010, when the recession ended.
States have enacted a net $2.3 billion of tax cuts and fees in fiscal 2015, following a $2.1 billion reduction in taxes in fiscal 2014. This is also the second consecutive year of tax cuts. Twenty-one states have enacted net tax cuts, while 10 have shown increases. In most states, however, tax cuts have been relatively minor, indicating an on-going uncertainty of the economy. In addition, states have enacted $669 million in new revenue measures, which might enhance or reduce general fund revenue but will not affect taxpayer liability.
Total state balances are projected to decrease to $53.1 billion, or 7.3 percent of expenditures, in fiscal 2015. This follows a decline in fiscal 2014, whereby balances decreased to $62.7 billion, or 8.9 percent of expenditures, from $70.6 billion in fiscal 2013. Total balances, including ending balances and "rainy day" funds, are a crucial tool that states rely on during economic downturns. It should be noted that combined balance levels of Alaska and Texas have reached $20.6 billion, accounting for 38.8% of states' total balances in fiscal 2015, while the remaining states have average balance levels of 4.8%.
