The fiscal health of most state's general funds has some paying cash for infrastructure projects instead of issuing bonds in a rising rate environment, though it appears some states are beginning to reach the end of the windfall.
State officials ruminated on the state of their budgets during an event hosted by the National Association of State Budget Officers on Tuesday. The discussion included economic analysis by Emily Mandel, Moody's Analytics and was moderated by Shelby Kerns, executive director, NASBO. Kate Nass, the deputy chief financial officer at the Oregon Department of Administrative Services indicated that Oregon may be sailing towards the end of the funding windfall.
"Our biennial budget is about flat, so that feels hard," Nass said . "We had to make some hard choices and we ended up pulling some money out of our rainy-day fund." The state used the money to shore up housing, health, and education programs.
NASBO tracks and posts state budget summaries which have been showing a steady rise in revenue growth and reserve contributions for the past two years. The group has reported that rainy day balances grew 58% in fiscal 2021, rose again in 2022 and are projected to increase this year. But the gains may be tapering off.
General funds levels have tripled in the past few years thanks to higher tax collections and federal stimulus money. The states have used the money to pay down debt, paying cash instead issuing bonds for capital projects, and making supplemental payments to pension plans.
Oregon employs a tax kicker system that sends budget surpluses back to taxpayers as a credit. Colorado's Taxpayer Bill of Rights champions a similar strategy and is kicking a 14% surplus back to its citizens while also putting federal funds into the state's highways.
"The stimulus funds helped us to change the financing mechanism for how we're paying for Colorado's roads," said Lauren Larson, director, Colorado Office of State Planning and Budgeting. "Without those dollars, the deal never would have gotten done."
Kimberly Murnieks, director, Ohio Office of Budget and Management, said that her state recently transferred $700 million into its reserves, giving it a record high balance. The state has also been investing federal funds into debt service.
"We used the one-time federal funding to pay off our unemployment insurance debt from the pandemic so that would not be a drag on our businesses," she said. "We have invested in water and wastewater infrastructure projects and communities all across our state."
NASBO's recent data connects its findings from late
Per NASBO's numbers from
