NCSL: State Budgets Stable, But Recovery 'A Work in Progress'

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WASHINGTON — State budgets seem to be "stabilizing and settling into a period of modest growth," but recovery from the Great Recession is still "a work in progress," the National Conference of State Legislatures concluded in a report released recently.

"Although budget gaps are rare and policymakers may have some flexibility to deal with spending overruns or other unexpected developments, there appears to be little room for major new policy initiatives," Arturo Pérez, fiscal affairs program director at NCSL, said in a news release.

The report, NCSL's fall 2013 state budget update, is based on data collected in the fall from legislative fiscal officers in the states and the District of Columbia.

More than two-thirds of legislative fiscal directors viewed their states' fiscal conditions as stable, with officials frequently describing them as "stable with slow growth" or "moderately positive." Some state officials used more upbeat language, though a few described their states' fiscal situations as weak or mentioned structural shortfalls.

Most states have had revenue collections that have met or exceeded expectations in fiscal 2014 so far, and most states believe they will meet their revenue projects for the rest of the fiscal year, NCSL said. The vast majority of states' fiscal years start in July and end in June.

Fiscal directors in eight states reported that revenues will likely exceed forecasts, while officials in four states — Alaska, Indiana, Tennessee and West Virginia — said that revenues are unlikely to meet their projections, according to the report.

Through October, only a handful of states missed their targets for personal income tax collections, but there was more volatility with corporate income and sales tax collections. "The real test for sales tax collections, however, will occur in December after officials can assess the strength of holiday sales," the report said.

Sixteen states reported personal income tax collections exceeding their latest estimate, 18 states and D.C. found collections were on target and six states were below their latest estimate, NCSL said. Nine states do not levy a broad-based personal income tax.

Eleven states' general sales tax collections were stronger than their estimates, 21 states and D.C. reported collections coming in on target and 12 states' collections were below their forecasts, NCSL said. Five states do not have state sales taxes.

Fourteen states reported corporate income tax collections that exceeded expectations, 15 states and D.C. had collections coming in on target and 13 states' receipts were below expectations. Six states don't levy a traditional corporate income tax, and information about how Illinois' corporate income taxes compared to its estimate was not available, NCSL said. Information about how any type of tax collections performed compared to forecasts was not available for Nebraska because the state's predictions had recently been revised.

Seventeen states reported that spending in at least one category is significantly over budget for fiscal 2014. For example, ten states had spending overages on corrections through the first four months of the fiscal year, nine states had spending on Medicaid that was over budget and five states had education spending over budget, NCSL said.

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