November 21, 2003
Fiscal Storm Shows Signs of Subsiding
NCSL Report Details States' Successes, Struggles in Early FY 2004
DENVER -
Cautious hope is on the horizon for states, which have closed a cumulative $200 billion budget gap since FY 2001, a new report by the National Conference of State Legislatures shows.
Compared with one year ago, fewer states are reporting budget gaps. At the same time, more see revenues outperforming original forecasts and half say the revenue outlook for the remainder of the fiscal year is stable.
The upswing has not reached every state. Many still are concerned about revenue performance and others are dealing with cost overruns and budget shortfalls just months into FY 2004.
"Fewer states are reporting budget gaps, and revenue performance is improving," said NCSL President Marty Stephens, Speaker of the Utah House, "It's too early to pull out the sunglasses, but the fiscal storm we've endured may be breaking up."
Keeping budgets balanced hasn't been easy. With the enactment of their FY 2004 budgets, lawmakers successfully closed a cumulative gap that reached nearly $80 billion. They were cautions in their spending, appropriating 0.2 percent less than they spent in FY 2003, even though revenues are expected to grow 1.8 percent from last year's level.
"For wary policymakers, the lack of more bad news is good news," said NCSL Executive Director Bill Pound. "The fiscal situation of the last three years presented state legislators with new challenges and difficult choices. There is now reason for optimism."
The report is based on a November survey of legislative fiscal directors. Below are some telling numbers comparing this November to last.
| Number of states with ... | Nov. FY '04 | Nov. FY '03 |
| ...Budget gaps | 10 | 31 |
| ...Revenues above forecast | 21 | 3 |
| ...Revenues on target | 13 | 10 |
| ...Revenues below forecast | 16 | 37 |
| ...A stable revenue outlook | 24 | 8 |
| Cumulative budget gap | $2.8 billion | $17.5 billion |
Despite these positive signs, 22 states see spending overruns in areas including Medicaid, corrections, mental health community programs and early childhood care. And although personal income tax collections have been improving in some states, some note that this might be caused by overwithholding: Strength in this area now could turn into weakness next April.
Fifteen states are concerned about the revenue outlook for the remainder of the fiscal year. Two states are pessimistic about it. Although the survey did not ask about FY 2005, anecdotal information suggests that fiscal problems will persist.
"We are very positive and the situation is getting better," one survey respondent said. "But we're nowhere near good."
Copies of the report are complimentary for legislators, legislative staff and credentialed members of the media. Journalists should send an email to press-room@ncsl.org to obtain their copy. Others may contact NCSL's Publications Department at 303-364-7700 or books@ncsl.org.
NCSL is a bipartisan organization serving the legislators and legislative staff of the states, commonwealths and territories. Its mission is to improve the quality and effectiveness of state legislatures, foster interstate communication and provide the states a strong, cohesive voice in the federal system.
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