State Fiscal Outlook for FY 2002: October Update

• State Fiscal Outlook for FY 2002: October Update
• FY 2002 Revenue Update: Rapid Deterioration
• State Expenditure Update
• Addressing Problems in FY 2002 Budgets
• Budget Outlook for the Rest of FY 2002
• Tables
• FY 2002 Expenditure Update
• Budget Cuts or Holdbacks to Balance FY 2002 Budgets
• Use of Reserves to Balance FY 2002 Budgets
• Other Measures to Balance FY 2002 Budgets
• State Fiscal Outlooks for FY 2002 by State

For more information: statebudget-info@ncsl.org

State Fiscal Outlook for FY 2002 by State as of Oct. 31, 2001

Revenue Update

Expenditure Update

Actions to Address Budget Shortfalls

FY 2002 Budget Outlook

Alabama

The fiscal year started Oct. 1, and so far revenue collections for the general fund are on target. A November special session is scheduled to discuss a potential revenue shortfall in the Education Trust Fund. Budget or revenue adjustments will be needed to avoid a pro-ration in FY 2002 (a 6.2 percent pro-ration was instituted in FY 2001).

The fiscal year just started, and so far expenditures are on target.

Expenditures are on target so far. No action is anticipated at this point.

The budget is on target at this point. A November special session is scheduled to discuss a potential revenue shortfall in the Education Trust Fund.

Alaska

Tax collections, which fluctuate with oil prices, are down compared to last year. Oil currently is at $20 per barrel compared to a high of $28 per barrel in FY 2001. The state’s economy (based on fishing, timber and oil) shows little change. Effects on tourism will become more apparent in the spring.

Expenditures are on target, although a $20 million supplemental appropriation for Medicaid is likely.

Typically, $500 million is drawn from the constitutional budget reserve every year to cover insufficiencies in general funds, and this year will be no different.

Budget pressures continue.

Arizona

General fund revenue collections were $85.6 million (5 percent) below target for the first quarter. Sales and use collections were 6 percent below target. Personal income tax revenues were 8 percent below estimates. Corporate income taxes were on target for FY 2002. Administration and legislative forecasters lowered FY 2002 revenues by $675 million (10.3 percent). Under this forecast, FY 2002 general fund revenues would decline 2 percent from FY 2001.

A $40 million shortfall is expected in the Medicaid program for FY 2002.

A special session on budget issues will convene in November. Policymakers are expected to tap into the state’s $300 million rainy day fund. With some estimates projecting a $1.6 billion revenue shortfall for the FY 2002-2003 biennium, all programs will be considered for budget cuts.

The budget outlook for FY 2002 is quite dire considering the size of the projected shortfall. Everything is subject to negotiation as policymakers prepare for a November special session to address budget problems.

Arkansas

General fund revenue collections in the first quarter of FY 2002 are $7 million less than FY 2001 and $22.6 million (2.7 percent) short of projections. Corporate income taxes are down 50 percent from the first quarter of the prior year while sales tax revenues only grew by 1 percent. Personal income tax collections were up 4 percent overall, but estimated payments fell. The revenue forecast is expected to be revised downward by approximately $100 million (3 percent) in November. This revision would reduce projected FY 2002 revenue growth to about 1 percent.

No significant expenditure overruns have emerged thus far.

State statute sets the budget cutting process. At the same time the budget is enacted, the legislature determines the share of any budget cuts that each agency must absorb. The governor determines a dollar amount of the overall budget reduction. Each agency is responsible for making cuts.

The budget outlook for the remainder of FY 2002 is pretty bad. The legislature will not be able to accomplish many of its goals.

California

First quarter general fund revenue collections were $700 million (4.6 percent) below forecast. Falling revenue collections are tied to the national economic downturn, the high tech slump and the stock market decline.

Expenditures appear to be on target.

The governor has ordered a current year hiring and contract freeze that exempts only public safety and K-12 education.

There is concern over the growing budget gap in FY 2002.

Colorado

A September revision to the general fund revenue estimate dropped projected revenues by $185 million for FY 2002. General fund revenue estimate was not available for September, but continued weakness was expected for personal income and sales tax revenues. Final September sales tax receipts data are not expected until early November.

Expenditures are on target. Medicaid spending is being monitored carefully over concerns that it will run over budgeted levels.

The governor has asked state agencies to cut 1 percent from their FY 2002 budgets and another 1 percent from their FY 2003 requests. Exempt agencies include K-12 education and Medicaid. The state also has cut $173 million in general fund transfers to highway projects and an additional $219 million from other capital projects.

The budget outlook for FY 2002 does not look good. Additional adjustments to spending are likely.

Connecticut

Although final numbers are lagging, sales tax collections are expected to be negative compared to the budgeted estimate. Withholding tax receipts averaged 1 percent growth in the quarter compared to a budgeted estimate of 6 percent. An October revision to FY 2002 general fund revenues projects a drop of $301 million or 2.5 percent from the budgeted level. The revision was based on flat sales tax performance and falling withholding collections that date back to earlier quarters.

FY 2002 expenditures are slightly above target. The major overruns are in health and human services (about $40 million to $50 million).

To help address a projected $81 million shortfall, the governor reduced budget allotments by $20 million early in the fiscal year. Since that reduction, the revenue shortfall has grown. The budget stabilization fund might be used.

There is concern about revenues. The governor called a special session for Nov. 13 to address a shortfall that ranges from $301 million to $348 million.

Delaware

Revenues are slightly below estimates and a slowing trend is emerging. An Oct. 26 revenue revision reduced the FY 2002 forecast by $12.7 million (0.5 percent.) The downward revision might have been larger if not for a large one-time corporate income tax payment. The revision constitutes a new working estimate for the budget rather than a formal resolution, which only occurs once a year.

Expenditures are on target, but are being restrained somewhat due to the revenue slowdown.

Budget cuts are a possibility, but reserve funds use is not anticipated.

With revenues down appreciably, steps to slow spending will be required. There probably will be very little growth in the budget next year.

Florida

Declining sales, estate and corporate income tax collections caused the state to issue a revised revenue forecast for FY 2002 that calls for a drop in general fund revenues of $1.3 billion or a 2.6 percent decline from FY 2001.

General fund expenditures are on target with budgeted levels.

Legislators are meeting in a special session to debate cuts in the current budget of 5 percent or between $800 million and $1.3 billion. The governor hopes to protect spending for K-12 education, criminal justice programs and the elderly. The Senate is considering a repeal of a previously enacted tax cut on intangibles.

Officials are struggling to balance the FY 2002 budget in a special session that began in late October.

Georgia

General fund revenue collections for the first quarter of FY 2002 were 6.3 percent below the same quarter in FY 2001. The budgeted revenue estimate for FY 2002 called for revenues to end $267 million below FY 2001 actual collections.

Medicaid is over budget and is anticipated to require supplemental appropriations before the end of the fiscal year. An $830 million surplus carried forward from FY 2001 will help offset spending overruns.

The governor has asked for 2.5 percent cuts from all general fund agencies, but some exceptions are likely.

It is anticipated that the state can handle any budget problems in FY 2002 with current surpluses. Base budget requests for FY 2003 are being revised down 5 percent.

Hawaii

Although collections were largely on target with expected growth rates for July and August, first quarter collections (which include September) are expected to fall below projections. Officials are especially concerned about the significant decline in tourist-related revenues. The revised revenue estimate for FY 2002 (made in early September) is 4.1 percent compared to the budgeted level of 5.1 percent. At the request of the governor, there will be an emergency meeting to revise the state revenue forecast Nov. 14.

The state is reporting unexpected costs for security and a dengue fever outbreak.

The Hawaii Legislature is meeting in special session to consider calls by the governor for tax incentives and tax holidays. The governor also is informally calling for 5 percent cuts from some state agencies. There has been some consideration of tapping the rainy day and the tobacco settlement funds.

There is a great deal of concern over the decline in tourism and the related impact on associated businesses. The Legislature convened in a special session in late October.

Idaho

Revenues were projected to be 3.2 percent below last year (partially due to tax cuts and a slowing economy), but are instead down 5.5 percent. Tourism-related revenues are expected to be affected, but collection data are not yet available.

Although most expenditures are on target, a supplemental appropriation for Medicaid will be needed. A 15 percent Medicaid increase for FY 2003 is expected. Many factors, including recruitment for the children’s health insurance program, are expanding enrollment in various programs.

Spending holdbacks-2 percent for state agencies and 1.5 percent for public schools-are in place. Tapping the rainy day fund would be done carefully and only for one-time expenditures, not to prop up the overall budget.

The budget outlook for the remainder of FY 2002 is challenging, and it’s possible that spending for FY 2003 could be 5 percent lower than the current budget.

Illinois

General fund revenue collections were $474 million below estimate during the first quarter of FY 2002. Sales, personal income, corporate income and inheritance tax collections were all down in the first quarter. General fund revenue is now anticipated to grow 0.4 percent in FY 2002 (compared with a 3.7 percent original forecast).

General fund expenditures are on target with budgeted levels, but there is concern over some areas of spending, including state group insurance and prescription assistance for the elderly.

The governor has called on agencies to build up reserves from within their FY 2002 budgets. A hiring freeze, restrictions on travel and cuts in equipment purchase are currently in place. The goal is to trim the budget by 2 percent, which comes close to covering the revenue shortfall. Consideration is being given to delaying the opening of some new prisons.

The budget outlook is bleak, as the economic situation in the state has moved from "bad" to "worse."

Indiana

First quarter revenue for the general and property tax replacement funds (which need to be considered together) was down 0.7 percent from the first quarter of last year and is 6.1 percent below the April 2001 forecast. Individual and corporate income tax revenues are down significantly. Revenue revisions are expected for the individual income tax, the corporate income tax and potentially the sales tax.

Expenditures are on target.

The governor has called for 7 percent expenditure cuts and no pay raises for state employees. He also will propose more cuts in November. The current budget already anticipates using reserve funds (rainy day, Medicaid reserve, tuition reserve) and gaming revenue, which is not generally used by the general fund. It also includes payment delays for K-12 tuition support and higher education funding.

There will be more cuts.

Iowa

In the adopted FY 2002 budget, revenues were projected to grow at 3.8 percent. Revenue collections through the first quarter are 1.3 percent below estimate. The revenue estimating conference revised its FY 2002 estimate to 1.9 percent growth. This translates to a $157.7 million shortfall from the original budgeted estimate.

Expenditures are on target for the original estimate. Medicaid spending is projected to exceed its estimate by $25 million.

The governor has proposed a $200 million spending reduction in FY 2002. The proposal calls for a 4.3 percent across-the-board spending cut. During a special session that begins Nov. 8, the legislature will consider exemptions for K-12 education, Medicaid, property tax credits and public safety.

There is a great possibility that revenue collections will continue to underperform expectations and further spending cuts may be necessary. A special session is scheduled for Nov. 8.

Kansas

Overall, general fund revenue collections in the first quarter are down 0.9 percent or $8.8 million below the estimate. So far, sales, personal income and corporate income taxes are on or near the estimate. Sales tax receipts don’t yet show the impact of Sept. 11 (current figures are up 0.5 percent).

Expenditures mostly are on target, except for the state welfare agency, which has a caseload increase. Officials have requested about $23 million in supplemental funding.

Officials anticipate budget cuts and mid-year administrative actions. Hiring freezes are possible. There is some expectation that K-12 education could be exempt, as well as welfare, since education already needs supplemental funding. The state finance council has issued a $150 million certificate of indebtedness, a cashflow instrument or internal borrowing tool, to keep the general fund in the black. It transfers money from other funds, but these must be repaid by the end of the fiscal year.

The outlook is dismal. No increases in state employee salaries, regents’ system, or K-12 education are expected. An agency might do just as well to see flat funding. As yet, there have been no layoffs or shutting of agencies.

Kentucky

Sales and use and personal income taxes-which comprise about 80 percent of general fund-are not meeting budgeted estimates. The general fund revenue forecast was revised down by $467 million (7.5 percent) in October, and further revisions may be required. (Transportation fund revenues were revised down by $123.3 million.) The new FY 2002 revenue growth estimate is 0.8 percent.

The state share of Medicaid overruns is expected to reach $85 million.

Mid-year agency budget cuts and substantial withdrawals from the rainy day fund (about half the $240 million available) will be necessary to balance the budget. K-16 education and Medicaid are expected to be exempt from the cuts. No tax increases or special sessions are anticipated.

The budget will be balanced since shortfalls were caught early.

Louisiana

General fund revenue collections were reported to be over estimate through the first quarter of FY 2002. Revenues performed strongly during the past fiscal year and continued into FY 2002. Some problems are anticipated in the coming months as oil prices drop.

Some supplemental budget requests are expected because spending is $34 million above estimate.

No budget cuts are anticipated. A debate is expected during the upcoming regular session as more than $600 million in temporary tax extensions are due to expire.

The budget outlook is centered on the current assumption that revenues will grow slower than projected. A special session is possible.

Maine

General fund revenue was under budget by $33.8 million, a negative 7.2 percent variance. The individual income tax is also beginning to underperform. It had been shoring up general fund revenue until the last two months. The consensus economic forecasting commission and the revenue forecasting committee will be meeting in November to review the economic forecast and the revenue estimates. The revenue forecasting committee has a Dec. 1 reporting date.

There are no significant expenditure variations at this point.

The governor has implemented an executive order to constrain spending. School subsidies, retirement funding and debt service are exempt. A reserve of $20.8 million for tax conformity and other revenue shortfalls was set aside at the end of FY 2001. Although there are no proposals pending yet, the rainy day fund with its current balance of $143.2 million will be looked at to address a portion of the revenue shortfall.

More information will be available after Dec. 1.

Maryland

For the first quarter of the fiscal year, revenues are $90 million below projections and are 3.3 percent below the same quarter last year. Lagging sales and personal and corporate income taxes are driving the decline. The forecast will be unofficially revised Oct. 30 in preparation for the first meeting of the Spending Affordability Committee.

Expenditures are exceeding budgeted amounts by about $200 million. Most of the overage is in Medicaid.

The governor has directed agencies to freeze hiring (to save $41 million) and reduce operating expenses (to save $21 million). He also has canceled $65 million in pay-go capital projects (approximately $700 million had been approved in FY 2002). About half of state programs are exempt from the cuts, including public safety and direct care. So far, K-12 education funding has been preserved.

The state has an unresolved fiscal problem in the magnitude of $300 million to $400 million that will require additional action. The outlook is grisly.

Massachusetts

General fund revenues were down $293 million in the first quarter of FY 2002, compared to the same period in FY 2001. Weak revenue performance could result in a $1 billion shortfall or 6.25 percent for FY 2002.

Medicaid is considered to be underfunded in budget proposals under consideration. Massachusetts has yet to enact a budget for FY 2002.

Based on what is on the "table" in the House and Senate, the state could be facing a possible $1 billion shortfall and budget cuts of $500 million to $600 million. There is some consideration of tapping the tobacco settlement fund.

A $579 million surplus from FY 2001 is now in a transitional escrow account and is available for transfer to cover part of the anticipated shortfall in FY 2002.

Michigan

The fiscal year began Oct. 1. The state has seen significant revenue declines from various tax sources for several months. Based on an Oct. 23 revision, officials now expect FY 2002 revenues to be 2.5 percent below FY 2001 collections (the original forecast put growth at 0.4 percent). General fund revenues for FY 2002 are expected to be down by $462.5 million and school fund revenues down by $265.5 million.

Although most expenditures are on target, Medicaid will require a modest supplemental of about $22 million.

To address the revenue shortfall, it would be necessary to cut the general fund budget by $540 million (5.6 percent) and the school fund budget by $336 million (2.9 percent). Lawmakers are negotiating a plan to address the shortfall. There is some expectation that the rainy day fund would be used to close the school fund budget gap to preserve K-12 education. The general fund budget gap is expected to be closed through cuts. Some lawmakers also are proposing a delay in previously enacted, phased-in tax cuts. A plan is expected by Nov. 8.

The revised, Oct. 23 forecast is very conservative. Actions to bring spending in line with this new forecast are expected to get the state through the rest of the fiscal year.

Minnesota

Revenues were projected to grow at 3.5 percent in FY 2002. First-quarter collections were down $99 million ($2.726 billion instead of the projected $2.825 billion), primarily due to sluggish personal and corporate income tax revenues. A new forecast will be issued in late November or early December.

The budget currently is under control, although more people may become eligible for human services programs.

No steps are being taken at this time.

The state will continue to have concerns about slowing revenues.

Mississippi

General fund revenues were under estimate through the first quarter of FY 2001 by $46 million or 5 percent. Corporate income, sales and personal income tax collections all were below estimate.

Medicaid is reported to have a $124 million deficit, which is likely to result in supplemental budget requests in January. Adult corrections spending also is experiencing some shortfalls.

No budget cuts have been announced, but adjustments are likely. While there has been no discussion to tap the rainy day fund, state law allows the governor to take up to $50 million from the fund without legislative approval.

Officials are very concerned about year-to-date revenue performance.

Missouri

Although revenue was projected to grow at 5.4 percent in FY 2002, first quarter receipts indicate growth of 3.7 percent. Individual income is down by 1 percent. Sales and use taxes are off by 2 percent to 2.5 percent. Corporate income taxes are substantially off projections, although they comprise a smaller percentage of total revenue.

Expenditures are on target, although Medicaid is a concern for possible budget overruns.

The governor’s office has ordered $150 million in holdbacks. Education is protected under this proposal. Officials do not anticipate tapping the rainy day fund, and it is politically difficult to do so. The constitution requires a two-thirds majority of the General Assembly to tap into it, plus the state must pay back the fund within three years.

The budget outlook is dim. Fiscal constraint is the key. State agencies must achieve efficiencies. The economy is growing, but not at the rate previously projected.

Montana

Revenue growth is on track at the projected 2 percent rate, and income taxes are still coming in strong.

There are no budget concerns at this time. A supplemental appropriation of $8 million to cover forest fire costs is needed, which is normal procedure.

Not applicable.

The budget outlook is cautiously optimistic, thanks to income tax collections at the end of FY 2001 that exceeded estimates and provided a revenue carryover into the current fiscal year.

Nebraska

First quarter general fund revenues were below the budgeted level. The October revision to the general fund revenue estimate projects revenues to fall short by $220 million or 3 percent to 4 percent for the biennium. Reasons for the revision included declining personal income tax and sales tax collections.

Expenditures are on target.

No administrative actions are allowed under current law. A special session, convened in late October, addressed the revenue shortfall. If cuts are considered, exemptions are probable for Medicaid, K-12 education aid and custodial/care facilities. No further tapping of reserves is expected. Other strategies are likely, but it is too early to tell what they might be.

A special session was convened in late October to address budget problems. Further adjustments are possible in the regular session in 2002.

Nevada

Revenue collections in the first two months of the fiscal year were on target; September figures are not yet available, but are expected to be lower than originally projected.

Although Medicaid pressures may be growing, there are no budget problems right now.

The governor has instituted a hiring freeze until November. No other actions have been taken.

The budget picture for the remainder of the fiscal year is unclear at this time, although October indicators appear somewhat positive.

New Hampshire

State general fund tax collections were on target with budgeted estimates during the first quarter of FY 2002. The state does not have a general sales or personal income tax and is not as sensitive to changes in the national economy as other states.

General fund expenditures are on target with budgeted levels.

Not applicable.

The outlook through the remainder of the fiscal year is cautiously optimistic.

New Jersey

State revenues from major taxes are 2.8 percent below the first quarter of FY 2001. The personal income tax is down 5 percent and the corporate business tax is down 29.2 percent. Sales taxes (two months only) are up 3.7 percent, against a year-end expectation of 6.2 percent. The immediate effects of the Sept.11 events are unknown. The official revenue estimate will be revised to take into account recent revenue performance. Usually this would occur when the FY 2003 budget is introduced in February or March of 2002. The acting state treasurer has indicated that an earlier revision may be announced, in response to an updated appraisal of the post-Sept. 11 environment.

Expenditures are on target, except for a property tax rebate program called New Jersey SAVER, which incurred a $100 million overrun, necessitating a supplemental appropriation. The overrun was the result of a successful publicity and advertising campaign to get more eligible people registered for the program, which provides checks to homeowners based on school tax rates in their municipalities.

Via executive order, about $300 million has been placed in "budget reserve," which is a possible prelude to a year-end lapse or impoundment. It is likely that more stringent actions will be required as the year progresses. Programs that would be affected only as a last resort would be municipal and school aid distributions. The budgeted surplus is $1.02 billion, of which $720 million is in a rainy day fund and $300 million is undesignated. Both will be drawn down. Some capital expenditures already have been scheduled for postponement.

The outlook is difficult and challenging.
The state will have a new governor and Legislature in January, so decisions on how to address the budget situation will come from a new group of elected officials.

New Mexico

First quarter information is not yet complete, but will substantially underperform the budgeted estimate, due to the precipitous fall in natural gas prices. General fund revenues were revised as of Oct. 24. The new growth rate calls for a revenue decline of 1.7 percent as compared to an increase of 1.6 percent, a revision of $122 million. The current estimate includes substantial nonrecurring revenues. On a recurring basis, the estimate has been revised downward by $213 million. Estimates for all broad-based taxes were reduced because of economic conditions. Estimates for severance tax collections were reduced substantially due to the decline in energy prices.

There are significant overruns in Medicaid expenditures.

The current budget was well below the budget revenue estimate; money was left "on the table."

Resources are adequate to meet FY 2002 budget needs.

New York

The fiscal year began on April 1. Through the first six months of FY 2002, general fund revenues were below FY 2001 actual levels by $1 billion. The governor is estimating that FY 2002 revenues could be $3 billion or 7.5 percent below estimate. Current revenue collections are difficult to monitor because of allowances for late filings for those affected by the terrorist attacks of Sept. 11.

General fund expenditures are on target with budgeted levels.

Supplemental budget expenditures are more likely than budget cuts at this time, but the governor has issued no formal announcements. State reserves include $700 million in the rainy day fund, $750 million in other reserves and $3 billion in an unobligated balance.

Officials are already looking past FY 2002 to FY 2003 as the governor projects a possible drop in revenues of $6 billion due to the fallout from the weakened state economy. The state is looking at the prospect of more than 100,000 job losses since early September.

North Carolina

General fund revenue collections were down 3 percent in the first quarter of FY 2002 compared to the same quarter in FY 2001. The budget was based on anticipated general fund revenue growth of 4 percent.

Medicaid spending was over budget in the first months of the fiscal year.

The governor has imposed spending restrictions on travel, purchasing and hiring. State budget officials are working with agencies to possibly implement additional restrictive spending measures.

No response.

North Dakota

Revenue collections through the first quarter are down about 1 percent from forecast or roughly $2 million. This largely can be attributed to shortfalls in oil extraction taxes.

Medicaid spending has the greatest potential for overruns.

Spending cuts are not anticipated at this time.

The state will approach the remainder of the fiscal year cautiously. Oil prices are a concern.

Ohio

Tax receipts are under estimate by 5.3 percent. Non-auto sales tax revenue is under estimate by $99 million or 7.4 percent. The personal income tax is down by $102 million or 5.8 percent. The governor’s budget and management office revised the revenue estimate in mid-October, lowering the forecast by $709 million for this year and $763 for FY 2003, because of general economic conditions.

To date, expenditures are $129.4 million below estimate. The largest area under budget is health care, below by $42 million.

In mid-October the governor announced 6 percent cuts for this year. He hopes to exempt mental health (actually requesting $28 million more for the agency) and mental retardation. The Department of Education and Ohio SchoolNet also are exempt. The governor has proposed closing a variety of business tax "loopholes" and tapping the state’s rainy day fund. In addition, the plan calls for borrowing $100 million in tobacco settlement revenues in FY 2002.

Fiscal conditions will remain very tight. The current forecast is for a budget shortfall of $600 million. The governor proposes to make up slightly more than a third of this by agency budget cuts. The remainder of his proposals -loophole closings and rainy day transfers-will require legislative approval and leaders have not indicated when or how they will act on these proposals.

Oklahoma

General fund revenue collections were 96.8 percent of estimated collections in the first quarter of FY 2002. The state appropriates at 95 percent of estimated revenues, so a shortfall has not developed.

General fund expenditures are on target with budgeted estimates.

No budget cuts are anticipated at this time.

Officials hope that revenues drop no further than 5 percent in FY 2002. Revenues in FY 2003 are expected to remain flat or decrease slightly compared with FY 2002 levels.

Oregon

General fund revenues were down 9 percent compared to a September forecast, which had reduced projected revenue growth by 3.2 percent or $174 million. The new revenue estimate projects a 2.8 percent decline. Personal income and corporate income tax collections were down sharply compared to budgeted levels.

Because of prior outreach efforts, state spending for the health plan and Medicaid are over budget.

The governor has called for a 2 percent reduction in agency spending. Agencies are to have plans for 10 percent spending reductions in place by November in the event that additional reductions are necessary.

The budget outlook is bad, and the state is considering tapping its tobacco settlement funds. A special session is possible in 2002; a decision probably will be made after the December revenue forecast.

Pennsylvania

Through September, the revenue shortfall is $134 million. Personal income taxes were the largest category off target with corporate income tax receipts significantly behind as well.

Expenditures are on target.

The governor has called for $200 million in spending cuts. The Community and Economic Development Agency was singled out for significant cuts. Several other agencies must divert funds to budgetary reserves as well. There is a strong possibility that the state will tap its rainy day fund.

The budget forecast is gloomy. Additional spending cuts may be necessary. There is the concern that the state may lag behind the nation if the economy strengthens, as historically has been the case.

Rhode Island

The state implemented a new accounting system, so officials do not know at this time how general fund revenue collections have performed in the first quarter. There is some expectation that revenues are below projections. In the first week of November, the revenue estimating conference will convene to review the forecast. The major tax likely to be affected is the personal income tax.

Not all quarterly reports are in yet, but several departments are expected to exceed budgeted amounts. These include health and human services departments, like children and families, Medicaid, and maybe pharmaceutical programs.

The governor issued a hiring, spending and travel freeze in late October. The state would only tap its rainy day fund if the governor declares an emergency or if revenues go below estimate. Because money flows from the rainy day to the capital fund, capital projects for the following year would be sacrificed to reimburse the rainy day fund.

The outlook is cautious until more data are available.

South Carolina

Based on weak personal and corporate income tax collections through the first quarter, a new estimate was issued for FY 2002 calling for 1 percent revenue growth compared to 6.5 percent in the enacted budget. The new estimate reduced projected revenues by $310 million. September sales tax revenues were still not available.

General fund expenditures are on target with budgeted levels, but the budgeting control board is expected to cut spending by 4.25 percent to bring the FY 2002 budget back into balance.

The rainy day fund will be tapped to balance the FY 2002 budget. Some state employee layoffs are possible. Some agencies reportedly endured cuts of 15 percent earlier this year as the governor made expanding Medicaid and K-12 education top priorities.

The budget outlook is considered gloomy with falling revenues and planned cutbacks.

South Dakota

General fund revenue collections through the first quarter were below estimate, but an exact amount was unknown at the time of the survey. Without a personal income tax, the state relies on sales taxes for more than half of all general fund revenue.

General fund expenditures are on target with budgeted estimates.

No budget cuts presently are anticipated. Tapping the rainy day fund remains a possibility.

The state is moving along without any major budget problems and is likely to wait until the regular session in 2002 to address any that could appear.

Tennessee

Collections from August and September don’t look very good. Sales tax collections are a big problem. The estimate will be revised in December when the revenue estimating board meets.

There are no significant cost overruns, and Medicaid is on target. Agencies are trying to reduce expenditures to deal with expected revenue declines.

The state probably will use the rainy day fund. A special session may be called to consider other actions.

The outlook is gloomy.

Texas

The fiscal year began Sept. 1. General fund revenue collections are reported to be on target, but officials cite an inability to determine post-Sept. 11 revenue activity because of tax reporting lags. A clearer picture will develop by late November.

General fund expenditures are on target with budgeted levels.

No budget cuts are being considered at this time.

The present outlook does not anticipate any budget problems.

Utah

Preliminary estimates indicate revenue growth below 1 percent. Most of the decline can be attributed to lack of consumer confidence combined with higher unemployment numbers for the state. Estimates will be revised, but will not be available until the first week in November.

FY 2002 expenditures are on target. Although no overruns are anticipated, budget cuts are anticipated to meet revised revenue estimates.

The governor has reduced budgets by $73 million and proposes to reduce budgets by another $20 million. He is proposing to use approximately $67 million from the rainy day fund. However, this action will require an appropriation by the Legislature.

The outlook is uncertain. Officials hope the budget cuts already planned will be sufficient.

Vermont

General fund revenue collections were $7 million (3.2 percent) below target for the first quarter of FY 2002. An expected $5.3 million shortfall in sales tax revenue comprised the majority of the deficit. Transportation fund collections were slightly ahead of target. The general fund revenue estimate is expected to be revised downward by approximately $20 million to $25 million.

Although expenditures are on target, there are spending pressures from programs such as transportation, health and education that must be managed in light of the weak revenue outlook.

The governor has ordered an $8.5 million rescission of general fund spending authority and an additional $8.5 million cut is expected. He also delayed disbursement of funding for a number of one-time spending measures. When the legislature convenes in January, it will decide whether or not to restore some cuts. Reserve funds are a last resort and are not expected to be used unless the fiscal situation deteriorates further.

The budget outlook for the remainder of FY 2002 is one of managing spending to accommodate expected revenue shortfalls.

Virginia

First quarter revenue growth was down 2.4 percent due primarily to the national economic slowdown. The original revenue estimate projected growth of 7.5 percent.

Medicaid spending is currently $115 million overbudget, largely driven by prescription drug costs.

The governor took action under the current budget to reduce costs by $420 million, mostly by freezing capital outlay and leaving agency positions unfilled. Only the General Assembly (which will not meet until January 2002) may tap reserve funds. No proposals to do so have yet surfaced

Serious budget problems will continue throughout FY 2002.

Washington

Revenue collections have been lower than expected. Revenues were adjusted down $100 million in September, which did not account for layoffs at Boeing. In the November forecast, it is expected that revenues will be adjusted down between $600 million and $1 billion (over the biennium).

There are overruns in Medicaid, corrections, tort liabilities and lawsuits, fire fighting, and K-12. The total overrun amount will be about $300 million. This includes a $125 million shortfall carryover that was expected to be met by a 2001 bill, but the bill did not pass.

Reserves are dropping quickly as revenues decrease. The reserve balance in September was $450 million, but it is expected to be depleted by the November forecast. Budget reductions are possible.

The budget outlook is grim. At this point, the budget problem amounts to about $1 billion, including revenue shortfalls and expenditure overruns.

West Virginia

Revenues as a whole are slightly below target-99.5 percent of estimate through the end of the first quarter of FY 2002. Sales tax collections were $40 million short, but were offset by higher than expected severance tax revenue (mainly from coal mining.)

Expenditures are on target with no significant cost overruns.

No budget cuts are anticipated at this time.

The budget outlook is fine at this time with the state’s strong energy sector balancing a slowdown in retail activity.

Wisconsin

Expectations are that general fund revenues are below estimate, but lag times in tax reporting make it difficult to provide an estimate. A revision to the general fund estimate is expected, but not until January. State personal income tax collections account for 52 percent of total revenues.

General fund expenditures are on target with budgeted levels.

The governor has not yet issued any calls for cutbacks.

There is a general concern on where the budget may be heading.

Wyoming

Revenues are coming in at a slightly slower pace than projected. The original estimate was $608.6 million; the revised figure is $602.5 million. General fund sources revised downward were severance taxes (due to lower natural gas prices), investment income (due to poor market conditions) and inheritance taxes (due to federal tax changes). At the same time, sales and use tax collections are predicted to be about 3 percent higher than originally projected. Overall, revenues are expected to be $49.6 million below FY 2001 revenues.

Expenditures are on target.

No budget cuts are planned.

The state budgets biennially. The FY 2002 budget is balanced. As of now, no revenue shortfalls or other problems are expected that would affect the budget.

Source: National Conference of State Legislatures, October 2001