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Fiscal Affairs Program

State Budget Update: November 2003

Posted 19 November 2003

This report is also available in portable document format.

FY 2004 Budget Gaps
FY 2004 Budget Overruns
FY 2004 Revenue Performance
A Peek Ahead

FY 2004 Budget Gaps
FY 2004 Budget Overruns
FY 2004 General Fund Revenue Collections
Performance of Major Tax Categories
Revised Revenue Estimates for FY 2004
Revenue Outlook for the Remainder of FY 2004

State Budget Update: November 2003

The continuous deterioration that has dominated state finances in recent years appears to be easing. Fewer states are reporting budget gaps in the early months of FY 2004 than did so one year ago. The rate and extent of the financial improvement, however, is uneven and has failed to reach many states. But for wary policymakers, the lack of more bad news is good news.

With the enactment of their FY 2004 budgets, lawmakers successfully closed a cumulative budget gap that reached nearly $80 billion. This is on top of the shortfalls states began addressing in FY 2001. In total, lawmakers have resolved an aggregate gap of almost $200 billion.

Hoping to avoid the mid-year budget cuts and other adjustments that have plagued them in recent years, lawmakers were very cautious in their FY 2004 budgets. In fact, nationally, FY 2004 appropriations are slightly below (-0.2 percent) FY 2003 spending levels. Moreover, revenues are budgeted to grow just 1.8 percent above FY 2003 collections. While the accuracy of these estimates will not be known until the end of the fiscal year, early information can be useful in assessing whether states are on the right track with their budgets.

This report is based on information collected from legislative fiscal directors in November 2003. It covers the revenue and expenditure situation for the first quarter of FY 2004 for most states. It includes information on budget gaps that have appeared since the fiscal year began, and on spending overruns, state revenue performance and the revenue outlook for the remainder of the fiscal year.

These are the highlights from NCSL's November budget update survey:

FY 2004 Budget Gaps

Ten states report that a budget gap has appeared since the fiscal year began. This compares with 31 states that had gaps this time last year.
The cumulative budget gap is $2.8 billion, compared with $17.5 billion last year.
The FY 2004 gaps range from less than 1 percent in Connecticut and Rhode Island to 14 percent in Alaska (where officials report that the amount actually is smaller than originally projected). Two other states report gaps above 5 percent: Indiana (7.1 percent) and Michigan (5.6 percent in the general fund; 2.9 percent in the school aid fund). Indiana lawmakers will begin a special session on Nov. 18 to address their budget situation.
Several states noted that while a gap has not yet opened, there are factors that could lead to one. In Illinois, for example, the FY 2004 budget was built on the assumption that one of the state's riverboat licenses would be sold for $350 million. It now appears that the sale will not occur this fiscal year. In Oregon, signatures are being collected to ask voters to rescind a temporary tax increase that the Legislature approved in the 2003 session. The total amount at issue is $780 million over the biennium.
Other states that did not report a fiscal imbalance reported actions to address one should it occur. In Georgia, state agencies have identified 2.5 percent in cuts to various programs. In August, South Carolina took pre-emptive steps. In response to a year-end deficit at the end of FY 2003 and a downward revenue revision for FY 2004, officials tapped the Capital Reserve Fund and sequestered 1 percent from agency budgets.
Some states noted that if budget problems do develop, they can cover them with federal fiscal assistance money that hit state coffers after the FY 2004 budget had been enacted.

FY 2004 Budget Overruns

Twenty-two states report that spending is exceeding appropriated levels for some portion of the budget. As in past years, Medicaid is the category most often over budget. So far in FY 2004, 13 states report that Medicaid is over budget. Some of these states note that the recent change to the Federal Medical Assistance Percentage (FMAP) will cover the overage this year.
Six states also noted that corrections expenses are exceeding budgeted levels. In California, lawmakers will be asked to consider a $500 million supplemental appropriations request for adult corrections. Mississippi is facing a $60 million shortfall in corrections spending.
Other programs exceeding budgeted levels include mental health community treatment programs, foster care, early childhood programs, welfare and natural resources.

FY 2004 Revenue Performance

State revenue performance for FY 2004 is uneven across the states. On the positive side, 21 states report that revenues are performing above the original forecast. Revenues are on target in 13 others. Sixteen states report that revenue collections are below estimates. Last year the numbers were three, 10 and 37, respectively.
It is difficult to discern any meaningful trends about the performance of the major tax categories-personal income, sales and use, and business taxes. More states report weakness than strength in personal and corporate income tax collections, but their experience with these taxes is all over the board. About one-third of the states see stronger than expected performance in sales tax collections.
In California, revenue collections exceeded forecast by $514 million in the first quarter of the fiscal year and nearly all of this is attributable to personal income tax collections exceeding estimates. On the other hand, Illinois reports that income taxes continue to struggle.
Some states note that personal income tax collections in the first quarter of the fiscal year might be benefiting from over withholding, so current strength might turn to weakness next April.
Sixteen states have revised their FY 2004 revenue estimates. Collections are on target with the revision in 10 states, below in three and above in three.
Half the states report that the revenue outlook for the remainder of FY 2004 is stable. Only eight states reported a stable outlook at this time last year. As an encouraging sign, eight states are optimistic about revenue performance.
Because of uneven and, in some cases, disappointing performance for the first quarter of the fiscal year, 15 states are concerned about the revenue outlook. Two states-Kentucky and Montana-are pessimistic.

A Peek Ahead

Although this report focuses on FY 2004 budgets, many legislative fiscal officers used the survey to comment on FY 2005. Comprehensive information is not yet available on the outlook for FY 2005 budgets. Anecdotal information suggests, however, that problems will persist well into the coming fiscal year. One fiscal officer said, "We're okay for FY 2004. Our real problems will hit in FY 2005." Another had this perspective, "We are very positive and the situation is getting better. But we're nowhere near good."

Fiscal officers note that Medicaid and other health care programs continue to exert enormous pressures on state budgets. Add to them the fiscal demands associated with K-12 education, corrections and other programs, and the battle for state funds is fierce. Federal fiscal assistance funds have helped many states close budget gaps for FY 2004, but those funds are expected to be exhausted by the time FY 2005 rolls around.

Concurrently with spending pressures, state revenues continue to lag expectations in many states. Widespread concern exists about the timing and extent of a strong national economic recovery. As one fiscal officer noted, "Major taxes are flat for the most part, indicating that the recovery phase has yet to manifest itself in actual tax receipts."

Table 1. FY 2004 Budget Gaps
State	Budget Gap		Amount (millions)	Percent	Notes
State	No	Yes	Amount (millions)	Percent	Notes
Alabama	x
Alaska		x	$320.0	14.0%	The gap is smaller than originally projected.
Arizona	x
Arkansas	x
California	x
Colorado	x				At this point, there does not appear to be a gap in the FY 2004 budget. Officials will need to wait until later in the fiscal year when more information is available to be certain.
Connecticut		x	$38.1	0.3%
Delaware	x
Florida	x
Georgia	x				State agencies have identified 2.5% in various program cuts.
Hawaii	x
Idaho	x
Illinois	x				A "gap" per se has not yet been discussed. One component of the FY 2004 budget was the selling of one of the state's riverboat licenses for $350 million. At this time, it appears unlikely this sale will occur this fiscal year. The state is estimated to receive, however, about $675 million in increased Medicaid match and flexible grants. As appropriate, this money could be used to close a budget gap.
Indiana		x	$800.0	7.1%	A special session that began Nov. 18 will address the budget gap. The session could last up to three weeks.
Iowa		x	$63.0	1.2%	On Oct. 10, the governor issued an executive order for a 2.5% across-the-board reduction. Because of the Reinvention of Government Act passed last session, however, six departments now have "charter agency" status and are exempt. This includes the Department of Human Services and Department of Corrections (significant portions of the general fund budget).
Kansas	x
Kentucky		x	$262.4	3.6%	No actions at this time, except that the governor has implemented a hiring freeze and various management directives from the March budget bill. Medicaid cost containment actions also have been implemented.
Louisiana	x
Maine	x				Medicaid is the only significant overage identified, but numbers are not yet available. The administration was scheduled to present some savings initiatives at the Nov. 19 Appropriations Committee meeting to address the Medicaid shortfall.
Maryland	x				Because of temporary federal fiscal assistance funds and post-session budget cuts (the governor cut $208 million from the budget in July in part to offset the revenue loss from a business tax bill veto), the state should end FY 2004 with a fund balance.
Massachusetts	x
Michigan*		x	$505.0 GF $361.0 SAF	5.6% GF 2.9% SAF	No actions to date.
Minnesota	x
Mississippi		x	$60.0	1.7%	On Nov. 12, the Joint Legislative Budget Committee lowered the revenue forecast by $60 million. The state also is facing overruns in Medicaid and corrections, but federal fiscal assistance money and other funds will cover those.
Missouri		x	$240.0	3.5%	The governor's office estimates a gap. Withholdings are occurring in K-12 education, $190 million; higher education, $20 million; and all other state departments, $30 million.
Montana	x				A budget gap has not opened. This is due both to the fund balance at the end of FY 2003 being greater than anticipated and to the infusion of federal assisstance funds. Depending on the state's fire costs for next season and the potential shortfall in FY 2004 revenues, a budget gap could materialize.
Nebraska		x	$90.0	3.4%	The amount is half of a two-year, biennial estimated budget gap in relation to the state's minimum reserve requirement as of June 30, 2005.
Nevada	x
New Hampshire	x
New Jersey	x
New Mexico	x				The temporary Federal Medical Assistance Percentage (FMAP) increase will mitigate this issue in FY 2004.
New York	x
North Carolina	x				At present, there is no budget gap for FY 2004. Although revenues are coming in slightly behind expectations (by as much as $25 million), the General Assembly did not appropriate all the funds available for FY 2004, thus an unappropriated balance of $163 million is still available to help cover a shortfall if one persists throughout the year.
North Dakota	x
Ohio	x
Oklahoma	x
Oregon	x				There is a potential gap for FY 2004 and FY 2005 that depends on a possible referendum on the temporary tax surcharge passed by the Legislative Assembly during the 2003 session. The total amount at risk is about $780 million (approximately 8% of the 2003-05 biennial budget). Signatures are being collected to refer the temporary tax surcharge to a special election in February. If the referral makes it to the ballot, state agencies will be asked to begin planning for budget reductions as one alternative to close the gap. Another measure passed by the 2003 legislature disappropriates $545 million from selected state programs if the temporary tax surcharge measure is overturned. The difference between the disappropriation and the revenue loss would need to be addressed by other actions (including adjusting for subsequent revenue forecasts, additional expenditure reductions, passage of additional revenue measures in a special session or across-the-board reductions by the governor).
Pennsylvania	x
Rhode Island		x	$15.0	0.5%	None have been identified.
South Carolina	x				In response to the Bureau of Economic Analysis lowering the FY 2004 estimate and a $22 million year-end deficit for FY 2003, the Budget and Control Board took action in August. It reduced the Capital Reserve Fund by $98.6 million and sequestered an additional 1% from agency budgets for a total of $43.2 million.
South Dakota	x
Tennessee	x
Texas	x
Utah	x
Vermont	x				The state expects a surplus of new revenues over expenses, so there is no budget gap. Additionally, the state held $7 million to $10 million in reserves (in addition to surplus revenues) to meet potential budget pressures. These range from $10 million to $15 million, but available resources to cover them stretch from $15 million to $25 million.
Virginia	x
Washington	x				Anticipated expenditure increases appear to be within current reserves.
West Virginia	x
Wisconsin	x
Wyoming	x
Totals	40	10	$2,754.5
Note: Michigan GF = general fund; SAF = School Aid Fund
Source: NCSL survey of legislative fiscal offices, November 2003.

Table 2. FY 2004 Budget Overruns
State	Yes	No	Notes
Alabama		x
Alaska	x		Medicaid.
Arizona		x	Title XIX (SCHIP) expenditures could run over budget (caseload forecasts are still being examined).
Arkansas		x
California	x		Adult corrections submitted a preliminary supplemental appropriations request of $500 million; wildfire suppression costs are unknown.
Colorado		x	It is too early to know with certainty. There may be additional funds required in Medicaid, but the amount is uncertain.
Connecticut	x		The Department of Children and Families (DCF) has a net deficiency of $16.2 million, which consists largely of: 1) $8.2 million due to an unanticipated increase in the number of children in residential placement and a new residential development (primarily for female adjudicated delinquents) that was not budgeted; and 2) $4.8 million in unexpected costs for hiring 110 durational and 65 permanent social work staff in response to a finding of the DCF court monitor that the agency was noncompliant with agreed caseloads for treatment workers.
Delaware	x		Medicaid including the Federal Medical Assistance Percentage (FMAP).
Florida		x
Georgia	x		Medicaid benefits ($173 million).
Hawaii		x
Idaho	x		Medicaid costs are up, although the FMAP rate reduction will more than cover the increase for this year. Next year could be a problem.
Illinois		x
Indiana		x
Iowa		x
Kansas		x
Kentucky	x		Medicaid (balanced by federal Medicaid enhanced match).
Louisiana		x
Maine	x		Medicaid is running ahead of budget. Legislative and administrative estimates vary widely at this time. A Nov. 19 Appropriations Committee meeting should provide more clarification of the extent of the shortfall.
Maryland	x		Medicaid ($97 million), mental heath community treatment programs ($62 million), foster care ($31 million), other ($30 million).
Massachusetts		x
Michigan	x		Medicaid.
Minnesota		x	A Dec. 3 forecast will be the first estimate of any spending changes.
Mississippi	x		The current estimate for the year is that Medicaid ($95 million) and corrections ($60 million) are underfunded.
Missouri	x		Medicaid ($104.6 million) and early childhood programs ($20.6 million).
Montana		x
Nebraska		x
Nevada		x
New Hampshire		x
New Jersey		x
New Mexico	x		Medicaid.
New York	x		Medicaid and welfare.
North Carolina	x		The only area of spending that is significantly over budget is teacher ABC bonuses in the Department of Public Instruction (DPI). The General Assembly appropriates funds each year for ABC bonuses for schools that meet or exceed expected growth in the previous fiscal year. Based on estimates from DPI, the General Assembly appropriated $96 million for FY 2004 to cover bonuses earned during FY 2003. This year the estimate was short by $44 million. The state will cover these additional expenditures with reversions anticipated from DPI, which historically have been $60 million or more on an annual basis. The state has additional unanticipated expenses associated with recovery efforts from Hurricane Isabel. To date, the cost to the state is estimated at $32.2 million but may rise to $50 million as additional assessments come in.
North Dakota	x		The Department of Human Services anticipates Medicaid expenditures to exceed budgeted amounts by approximately 3%.
Ohio	x		TANF is over estimate by $2.6 million (2.3%).
Oklahoma	x		The Department of Corrections is requesting a $15 million supplemental for FY 2004.
Oregon		x
Pennsylvania		x
Rhode Island	x		Corrections; human services; children, youth and families; mental health.
South Carolina	x		Corrections.
South Dakota		x
Tennessee		x
Texas		x
Utah		x
Vermont	x		Corrections, child care, the Vermont state hospital, PATH (welfare), judiciary, and the Agency of Natural Resources.
Virginia		x
Washington	x		K-12 education.
West Virginia		x
Wisconsin		x
Wyoming		x
Totals	22	28
Source: NCSL survey of legislative fiscal offices, November 2003.

Table 3. FY 2004 General Fund Revenue Collections
State	Original FY 2004 Revenue Estimate	On Target	Below Target		Above Target		Through		Notes
State	Original FY 2004 Revenue Estimate	On Target	Amount (millions)	Percent	Amount (millions)	Percent	Sept. 2003	Oct. 2003	Notes
Alabama	-7.7%	x						x	One month into the fiscal year, no trends have yet developed.
Alaska	-11.1%				$50.0	3.0%	x
Arizona	6.2%	x					x		The 6.2% growth rate reported in July was based on estimated revenue collections for FY 2003. Actual FY 2003 collections exceeded the forecast. The growth rate is now forecast at 3.7% due to a higher base level of revenue from FY 2003.
Arkansas	6.8%		$9.0	0.8%				x
California	-9.2%				$514.0	2.8%	x		Collections are 2.8% above estimate on an annualized basis; $494 million are attributed to personal income tax collections above estimate.
Colorado	4.1%				$43.4	3.0%	x
Connecticut	3.3%	x						x
Delaware	4.0%				$72.3	2.9%	x		Current year revenue only (no adjustment to carry over from FY 2003).
Florida	3.6%				$232.0	5.0%	x
Georgia	8.7%		$630.0	4.4				x	FY 2004 revenue estimate is 8% above actual collections in FY 2003 (final audit).
Hawaii	6.2%		$29.8.2	2.8%			x		When the Legislature formulated its budget, the revenue estimate for FY 2004 was 6.4%. That estimate was increased to 7.7% in May. The current estimate for FY 2004 is 6.2%. For FY 2004, July revenues were down by 20.6% when compared to July 2002; however August and September revenues were up 11.5% and 10.3% from the prior year. After three months, revenues are even (no difference) when comparing the first three months of FY 2003. Looking at a running average-or a whole year's worth of collections (October 2002 through September 2003 compared to the same period the prior fiscal year)-revenues are off by about $29.2 million or 2.9% (actual collections are at 3.3%; projection is at 6.2%) .
Idaho	13.9%	x					x
Illinois	7.8%		x	x				x	It's still a little too early to provide numbers, but income taxes continue to struggle.
Indiana	9.2%		$152.2	-4.5%				x
Iowa	2.9%		$155.8	3%				x	The revised estimate of tax refunds was much higher than originally estimated ($70 million). Corporate income taxes are significantly below estimates.
Kansas	5.3%				$36.7	2.6%		x	Tax-only revenue was up $2.0 million or 0.1%. The $45.7 million from the federal Jobs and Growth Tax Relief Reconciliation Act of 2003 was not included in the earlier estimates, but is included in nontax revenues through October.
Kentucky	3.1%			-0.7%			x		The 3.1% revenue forecast was the adjusted percentage for 2003 session-related measures. The state does not estimate revenues on a monthly basis, so it is not possible to give a dollar figure for the amount revenues are below forecast.
Louisiana	-2.3%	x					x
Maine	8.7%				$21.1	4.4%	x		Most of the positive variance appears to be related to timing of receipts. The individual income tax, in particular, was $13.2 million over budget, but it is believed to be a matter of distribution of the estimate (difference) between anticipated payments and final payments and refunds.
Maryland	7.5%	x					x
Massachusetts	1.0%				$218.0	4.7%		x
Michigan	-4.2%		$374.0	4.6%			x
Minnesota	2.2%				$50.0	1.7%	x		1.7% is comparing actual to forecasted revenue for the three month period.
Mississippi	4.0%		$20.2	1.9%				x	State general fund collections are below the sine die estimate through October.
Missouri	3.3%		$4.6	0.2%				x
Montana	7.2%		$7.6	2.8%				x
Nebraska	8.5%		$18.5	2.2%				x	Estimates for FY 2004 will be revised again in February.
Nevada	26.4%				$9.3	0.4%	x	x	Sales tax (two months of collections) and gaming fee revenues (three months) are approximately $10.3 million higher than projected at this point in the fiscal year. FY 2004 general fund revenues are projected to increase by more than 26% compared with FY 2003 due to revenue enhancements approved by the Legislature. A number of existing tax rates were increased and new revenue sources approved with different effective dates. Most of the new revenue sources have effective dates of Oct. 1, 2003, or Jan. 1, 2004. It is too early to determine if general fund revenues are above or below projections in FY 2004.
New Hampshire	6.8%		$8.8	1.6%				x
New Jersey	2.2%	x						x
New Mexico	4.5%				$39.0	1.0%	x
New York	4.8%		$31.0	0.3%			x
North Carolina	2.6%		$21.0	0.4%				x
North Dakota	3.6%				$7.50	3.9%	x
Ohio	7.3%		$60.7	0.8%
Oklahoma	5.0%				$18.9	1.7%	x
Oregon	0.6%	x					x
Pennsylvania	(N/A)				$239.0	3.9%		x	The surplus is largely due to the state's extremely conservative official revenue estimate, which the governor certified in March. At the time, the economic outlook was uncertain (in light of the Iraq war) and the state had yet to tally collections for the final four months of FY 2003. A revised FY 2004 revenue estimate is anticipated when the state budget, including revenue enhancements, is finally completed.
Rhode Island	2.0%				$6.9	0.8%		x
South Carolina	1.9%	x					x
South Dakota	1.1%				$32.1	10.3%		x	The amount is for revenue from all sources. Some one-time transfers were implemented faster than originally anticipated. Tax revenue, by itself, is above the budgeted estimate by $12.6 million (5.2%).
Tennessee	3.3%				$27.6	0.3%		x
Texas	1.6%	x						x
Utah	2.2%	x					x
Vermont	6.6%				$20.0	2.2%		x
Virginia	4.6%				$90.0	1.0%	x		Excludes federal Medicaid funds that are booked as revenues.
Washington	3.5%				$14.0	0.5%		x	Collections cover June through Oct. 10, 2003.
West Virginia	4.1%				$17.2	1.8%		x
Wisconsin	4.4%	x						x
Wyoming	9.3%	x					x
Totals: On target with original FY 2004 estimate, 13 states; below original target,16 states; above original target, 21 states.
Note: The percentages shown for the original FY 2004 revenue estimate are comparisons to FY 2003 revenue collections.
Source: NCSL survey of legislative fiscal offices, November 2003.

Table 4. Performance of Major Tax Categories
State
Alabama	On target.
Alaska	On target.
Arizona	Nonindividual income tax categories are currently running above forecast; however, the personal income tax is generating less than forecasted because of under withholding. Based on information from the Department of Revenue, the Legislature adjusted state withholding rates to offset the impact on state revenues of the spring 2003 federal tax package. A state withholding rate adjustment was needed because the state's tax is calculated as a percentage of the federal rate. It now appears that the adjustment was too low. Under withholding from July to December will not affect revenues as an individual's liability has not changed. The state will recoup this money in April 2004 (same fiscal year). Under withholding from January to June 2004, however, will not be recouped until the next fiscal year (April 2005). Therefore, the state will lose money on a current fiscal year basis unless the rates are adjusted further.
Arkansas	Individual income taxes are off $8.5 million (1.5% from forecast). Corporate income taxes are off $6.5 million (8.4%). Gross receipts taxes are up $8.6 million (1.4%).
California	Personal income taxes are doing better than projected. Other taxes are performing on target. There are no apparent weaknesses in revenue sources compared with the estimate.
Colorado	All major tax categories are above the June 2003 forecast.
Connecticut	On target.
Delaware	The personal income tax is on target. The corporate franchise tax is down 3.6%. Insurance taxes are down 7.7%. All others are on target.
Florida	Interest earnings are below estimate; all others are above.
Georgia	The sales tax is up 8.2%, individual income taxes are up 1.7% and corporate taxes are down 25.5%.
Hawaii	Personal income and general excise taxes are the largest revenue sources. Although both categories are performing better than the year before, they are not growing sufficiently to meet the revenue forecast. The same is true for corporate income tax collections.
Idaho	The state is ahead (of the revised revenue projection) in all categories.
Illinois	Major taxes are flat for the most part, indicating that the recovery phase has yet to manifest in actual tax receipts.
Indiana	All categories are below target.
Iowa	Before the revised estimate, the personal income tax was below estimate, the sales tax was on target, and the corporate income tax was significantly below the estimate. Other tax receipts also were significantly below the revised estimate.
Kansas	The personal income tax is down $11.4 million (-1.9%); the general sales tax is behind $2.5 million (-0.4%); the corporate income tax is up $8.0 million (21.4%); and severance taxes rose $6.2 million (27.9%).
Kentucky	The sales tax is performing at -4.4%; the corporate income tax, -4.4%; and the personal income tax, 5.0%.
Louisiana	Major tax categories are performing as expected.
Maine	The personal income tax is running ahead by $6.2 million (2.0%) through October based on preliminary numbers. Sales taxes are ahead of budget by $4.4 million (2.5% through September) and continued to run ahead of budget in October ($5.9 million or 2.3% through four months). Corporate income taxes were below budget through September, but rebounded in October, based on strong estimated payments; they are now running ahead through the first four months by $2.2 million (8.2%). Cigarette taxes had been ahead of budget through September, but retreated in October and are back to their previous trend of running under budget (-$1.1 million or -2.9%).
Maryland	Compared to the first quarter of FY 2003, the personal income tax is up 5.1%, the sales tax is up 5.1%, the corporate income tax is off 3.2%, and state lottery revenues are off 0.6%.
Massachusetts	Through October, personal income tax withholding is $50 million above the year-to-date benchmark; sales and use tax collections, $6 million above; and corporate and business tax collections, $104 million above the year-to-date benchmark.
Michigan	Below expectations.
Minnesota	The corporate tax is down; deed and mortgage registration revenue is up substantially; others are on forecast.
Mississippi	Through October, the sales tax was down $10.6 million (-2.5%), the personal income tax was down $5.9 million (-1.7%), and the corporate income tax was down $4.5 million (-5.9%).
Missouri	The personal income tax is up (2.0%), the sales tax is up (6.3%), and the corporate income tax is down (-17.0%).
Montana	Both personal and corporate income taxes are below budgeted amounts. The state does not have a general sales tax.
Nebraska	The personal income tax is behind (-7.0%), the corporate income tax is ahead (33%), the sales tax is down (-1.8%), and miscellaneous taxes are ahead (12%).
Nevada	Sales taxes have increased by 9.2% in the first two months of the fiscal year, compared to the same period a year ago (projected to increase by 5.0%). Gaming percentage fees have increased by 18.5% in the first three months of the fiscal year, but a portion of the increase is due to a 0.5% increase in the tax rate. To meet projections, gaming revenues will need to increase by 14.2% in FY 2004.
New Hampshire	Major taxes are performing as expected.
New Jersey	Personal income tax collections through October were 6.9%, generally on target with annual growth assumptions (5.9%). Sales tax collections (one month lag) were 4.4%, also on target with growth assumptions (4%). Corporation business tax collections were ahead of last year's level, but no firm conclusions are possible thus far due to the magnitude of revisions to the tax code for tax year 2002/FY 2003. The FY 2004 budgeted estimate is for a 16.5% decrease due to certain nonrecurring payments in FY 2003.
New Mexico	The personal income tax is tracking on forecast. Severance taxes, rents and royalties associated with natural gas and oil are significantly above forecast.
New York	Personal income and business tax revenues are weaker than expected.
North Carolina	Withholding receipts are up 3.8% for July through October. The sales tax is up 2.1%. Third quarter estimated payments for individuals are down 5%.
North Dakota	Through September, sales tax collections were $7.3 million (9.7%) above forecast. Personal income tax collections were slightly below forecast.
Ohio	The personal income tax was down $39.9 million (-1.7%) due to lagging withholding. The automobile sales tax was up $22.4 million (5.6%); the non-auto sales tax was down $14.5 million (-0.7%). The cigarette tax was down $17.5 (-9.6%). The corporate franchise tax (CFT) was up $7.0 million (16.9%). For the first half of the fiscal year, CFT activities are generally refunds, tax payments due to audit findings, late payments and other reconciliations.
Oklahoma	The net income tax (corporate and individual) is down $10.4 million (-1.9%). The natural gas gross production tax is up $33.6 million (45.3%). The sales tax is up slightly at $4.0 million (1.3%). The motor vehicle tax is up $5.5 million (9.8%). Other sources (estate tax, tobacco tax, interest and investments) are down $13.9 million (-9.3%).
Oregon	The personal income tax is down slightly from the forecast, the corporate income tax is up, and other taxes (insurance, cigarette, etc.) show no change. The state does not have a sales tax.
Pennsylvania	Personal income tax collections are $47 million above estimate through October, representing 3.5% growth over the same period last year. Sales tax collections are $73 million over estimate through October, representing growth of just 0.8%. Corporate taxes (net income and franchise tax) are $57 million above estimate through October, but are 1.5% below the same period last year. Nontax revenue is $25 million over estimate, which is partially attributable to the investment earnings on larger than anticipated state general fund balances (no school payments have been made yet this year and federal fiscal assistance funds remain unspent).
Rhode Island	Major taxes are above estimates; lottery revenues are below.
South Carolina	All three major categories have shown slight growth for the first quarter of the fiscal year: sales tax, 3.7%; personal income tax, 2.0%; and corporate income tax, 63% (corporate only makes up 2.1% of total general fund revenue).
South Dakota	So far, all major tax categories are exceeding estimates. Those taxes that have surpassed the estimates by more than $1 million include the sales and use tax ($6 million), the bank franchise tax ($1 million), and the inheritance tax ($4 million).
Tennessee	Sales tax collections are above estimates by $26.1 million. The corporate franchise excise tax is under estimates by $20.3 million.
Texas	The general sales tax is performing at estimated levels through October.
Utah	The sales tax is slower; personal income and corporate income taxes are slightly better.
Vermont	The state is seeing strength across the board. Sales, income tax withholding and estate taxes are doing very well.
Virginia	The personal income tax is lagging. But sales, corporate income and insurance premium taxes are doing well. Good sales tax numbers are thought to be attributable to federal tax relief and not sustainable. Overall, October looks good, too, but numbers are not final.
Washington	The major taxes (retail sales and use, property, and business and occupation) are generally performing slightly under estimate (approximately 1.5%).
West Virginia	The personal income tax is 96.56% of estimate; the consumer sales tax is 97.22% of estimate; business and occupation taxes are 112.64% of estimate; and the corporate income business franchise tax is 100.97% of estimate.
Wisconsin	In the aggregate, revenues from major tax sources are consistent with the current estimates. Adjustments to the projections for specific taxes, however, may be made in January 2004.
Wyoming	Major tax categories are performing on target.
Source: NCSL survey of legislative fiscal offices, November 2003.

Table 5. Revised Revenue Estimates for FY 2004
State	Revenue Estimate Revised			On Target	Below Target		Above Target		Notes
State	No	Yes	Date	On Target	Amount (millions)	Percent	Amount (millions)	Percent	Notes
Alabama	x
Alaska	x
Arizona	x
Arkansas	x
California	x								The official revenue estimate revision will be released with the governor's budget.
Colorado		x	Sept. 2003				$36.1	2.5%
Connecticut	x
Delaware		x	Sept. 2003	x					Another estimate is scheduled for Dec. 15.
Florida	x
Georgia	x
Hawaii		x	Sept. 15, 2003		$29.8	2.6%			When the Legislature formulated its budget, the revenue estimate for FY 2004 was 6.4%. That estimate was increased to 7.7% in May 2003. The current estimate for FY 2004 is 6.2%. Actual collections are at 3.3% growth.
Idaho		x	Aug. 28, 2003				$16.4	3.6%	The revised revenue projection for FY 2004 estimates a 15.9% increase over FY 2003 actual collections. This is lower than the budgeted estimate. The baseline increase is only 3.2%. The balance of that high percentage is due to sales and cigarette tax increases. Through the first quarter, total collections are 17.5% above the same period last year.
Illinois	x
Indiana	x								The next forecast is scheduled for January 2004.
Iowa		x	Oct. 10, 2003		$63.0	1.1%			The new estimate is for 1.2% growth. Personal income and sales taxes are on target with the revised estimate. The corporate income tax is significantly below the estimate, and other tax receipts also are below the revised estimate.
Kansas		x	Nov. 3, 2003	x					Tax only revenue is projected to drop $36.6 million (-0.7%), mainly in personal income tax. The $45.7 million from the Jobs and Growth Tax Relief Reconciliation Act of 2003 was not included in the earlier revenue estimate, but is included in the new one.
Kentucky	x
Louisiana	x
Maine		x	Nov. 14, 2003	x
Maryland	x								There will be an official revision in mid-December. Fiscal staff have advised the legislature's Spending Affordability Committee that the estimate predicts that general fund revenues will be written down about $65 million (-0.6%). This is roughly consistent with the planning estimate released by the comptroller's staff in September.
Massachusetts	x
Michigan		x	Oct. 14, 2003	x					The first month is at revised estimate.
Minnesota	x								The next forecast will be released Dec. 3.
Mississippi		x	Nov. 12, 2003	x
Missouri	x								The next forecast is scheduled for December 2003.
Montana	x								Key legislative committees were advised of potential revenue shortages from the corporation income tax and investment earnings. Further analysis will be presented to these same committees December 2003.
Nebraska		x	Oct. 31, 2003	x					Year-to-date revenue performance was presumed to match the Oct. 31 revision. An ex post analysis will be completed by mid-November.
Nevada	x
New Hampshire	x
New Jersey	x
New Mexico	x
New York		x	Oct. 28, 2003	x
North Carolina	x
North Dakota	x
Ohio	x
Oklahoma	x
Oregon		x	Sept. 1, 2003				$60.3	1.3%	The revised forecast for the biennial budget (FY 2004 and FY 2005) shows a net increase of only $8 million, or 0.08%. Although the FY 2004 revised forecast was up, the FY 2005 revised forecast projects a decrease from the forecast used to build the biennial budget.
Pennsylvania	x
Rhode Island		x	Nov. 10, 2003	x
South Carolina		x	Aug. 15, 2003	x					The Board of Economic Advisors reduced the estimate by $107.6 million. The new growth rate over FY 2003 is 1.3%. First quarter growth was 2.2%.
South Dakota	x								The next forecast is scheduled for February 2004.
Tennessee	x
Texas	x
Utah	x
Vermont	x								The forecast will be revised in January 2004. Officials hope that some of the extra revenue will be there at the end of the year. They expect an upward revision in the forecast in January. IBM layoffs occurred in October, so because of termination payments the state saw a one-time revenue bounce. Weakness is expected in future months.
Virginia	x								The state may not see an official revision in the governor's December budget. (He may let the surplus roll forward into next biennium.)
Washington		x	Sept. 18, 2003		$5.8	0.3%
West Virginia	x
Wisconsin	x								The next forecast is scheduled for January 2004.
Wyoming		x	Oct. 15, 2003	x
Totals	34	16
Totals: On target with revised forecast, 10 states; below revised target, three states; above revised target, three states.
Source: NCSL survey of legislative fiscal offices, November 2003.

Table 6. Revenue Outlook for the Remainder of FY 2004
State	Optimistic	Stable	Concerned	Pessimistic
Alabama		x
Alaska	x
Arizona		x
Arkansas			x
California	x
Colorado		x
Connecticut		x
Delaware			x
Florida	x
Georgia			x
Hawaii		x
Idaho	x
Illinois			x
Indiana			x
Iowa			x
Kansas			x
Kentucky				x
Louisiana		x
Maine		x

Fiscal Affairs Program

State Budget Update: November 2003

Posted 19 November 2003

Contents

State Budget Update: November 2003

FY 2004 Budget Gaps

FY 2004 Budget Overruns

FY 2004 Revenue Performance

A Peek Ahead