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State Budget Update

May 1996

Overview

As Fiscal Year (FY) 1996 draws to a close, states continue to enjoy a comfortable balance between revenues and expenditures, according to NCSL's Spring survey of legislative fiscal offices. Most state general fund collections are reflecting the nation's economic health. Forty-four states report revenues to be on target or ahead of projections. Just seven states expect revenues to be more than 1 percent below estimates at the end of the fiscal year. (See map.)

The majority of states (30) report that spending also is on target with original budgets. The small number of spending adjustments that have taken place reflect declines in welfare and Medicaid caseloads (nine states)--although Connecticut and Rhode Island are experiencing increases in human services caseloads--and growth in corrections populations (seven states). Arizona, Montana and Nevada in particular are dealing with extra costs for young offenders. Four states report supplemental funding for education.

Most states, although taking seriously the possibility of changes in federal Medicaid policy, are waiting to see exactly what those changes may be before making plans to deal with them. Alabama, Connecticut, Florida, Idaho, Indiana, Missouri, Nevada, North Dakota, South Carolina, Virginia and Washington report having commissions, task forces or interim committees that are closely monitoring congressional action and studying the possibilities of federal block grants.

A few states are not waiting for federal action to make program changes. For example, Nebraska is restructuring its health and human services agencies. New Jersey has sold its state-run HMO for Medicaid to the private sector. Ohio created a Human Services Budget Stabilization Fund to address possible federal budget changes. Pennsylvania passed a plan that removes adults without children from the Medically Needy program in anticipation of federal cuts. Vermont will begin to limit Medicaid use in FY 1997 and is moving forward with managed care for Medicaid clients.

Other states have focused on welfare reform and legislative appropriation of federal funds in anticipation of federal action. And, since any federal changes will affect both state and local governments, a few states are taking steps to involve locals in the process of studying and planning for future changes. Alabama, Michigan, Mississippi, Oklahoma and Utah are among those states.

As FY 1996 draws to a close, states are in the ambivalent position of having adequate revenues to meet current budget needs, while facing the possibility of big changes without knowing exactly what those changes may mean for future budgets.

State General Fund Collections (Projected): End of Fiscal Year 1996

States Above or Below Target
General Fund Collections: End of FY 1996

More than 1 percent above target:

Alaska
Arkansas
Colorado
Connecticut
Iowa
Kansas
Minnesota
Missouri
Nevada
North Dakota
Oklahoma
South Carolina
Tennessee
West Virginia
Wyoming

More than 1 percent below target:

District of Columbia
New Hampshire
New Mexico
Rhode Island
Vermont
Virgin Islands
Washington

Specific state actions are detailed in Appendices A, B and C.

See also:

• Appendix A: State summaries of FY 1996 revenues and expenditures
• Appendix B: Summary of state actions affecting Medicaid in anticipation of federal Medicaid changes.
• Appendix C: Summaries of state actions in anticipation of federal budget actions (excluding Medicaid) and local governments' involvement in the process.