Revised May 12, 2004

By Elizabeth McNichol

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State by State Data

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State government fiscal conditions remain weak, despite recent improvement, according to three of the leading bipartisan or academic organizations that track state taxes and budgets.[1]  As states write their budgets for the 2005 fiscal year which begins in most states on July 1, 2004, their revenues are still well below pre-recession levels.  States that borrowed money, used reserves, or shifted funds to balance their budgets in prior years have a budget “hole” from which to dig out.  And the spending cuts and reduced balances of the last several years have given states little cushion with which to work in enacting balanced budgets.



Selections from the Reports

“While state tax revenue growth is healthy again, real state revenue levels still have a way to go before they have fully recovered from the recession, even though it ended over two years ago.  While the curve is now clearly headed upward, it may still be years before the states have as much real revenue as they had before the recession.  This drop in state revenues has been reflected in the fiscal outlook of many states, as the budget debate still features spending reductions and+ tax increases.”  Nelson E. Rockefeller Institute of Government, State Fiscal News, May, 2004

“Despite some improvements in the states’ fiscal situations, the picture is far from rosy.  If the states were patients, you could say they are out of intensive care, but they’re not out of the hospital yet.”  Scott Pattison, Executive Director, National Association of State Budget Officers, May 9, 2004

“Although the magnitude of fiscal problems has eased, policymakers remain wary about the future.  Most have implemented multiple rounds of budget cuts and have depleted reserves.  At this point in the fiscal crisis, there are fewer options to address budget problems.  Simultaneously, state officials face pent-up spending needs, especially for those programs that have been cut, and growing health care costs.”  National Conference of State Legislatures, State Budget Update: April 2004.




Deficits, Surpluses and Rainy Day Funds



In summary, these reports show that while the worst appears to be over for state budgets, the recovery in revenues and spending is very slow.  State budgets remain depressed as a result of the poor performance of revenues over the last three years.  They have yet to see the kind of recovery that will allow them to get back to normal and restore some of the cuts of the past three years.

End Notes:

[1] This brief is based on the National Association of State Budget Officer’s semi-annual fiscal Survey of the States, the National Conference of State Legislatures’ April 2004 State Budget Outlook and the most recent quarterly report on state revenue collections prepared by the Nelson E. Rockefeller Institute of Government.