April 19, 2011
Recovering but not Recovered
State revenues are showing encouraging signs of recovery, but persistent budget gaps remain a daunting obstacle.
State budgets have been under constant pressure since the Great Recession first began in 2007. Legislators continue to make difficult budget decisions as it remains uncertain when states will be free of the budget gaps that have dogged them for several years.
A new state budget report from the National Conference of State Legislatures (NCSL) sheds some light on the shifting fiscal picture for states. NCSL’s State Budget Update: March 2011 shows that state revenues continue to stabilize or even grow, which is a welcome change after some of the most challenging budget years ever faced by states.
The general improvement in state tax collections is tied to the strong performance of personal income and sales and use taxes. Thirty-eight states reported personal income tax collections were performing at or above estimate. Additionally, 37 states reported general sales tax collections are on target or above estimate.
“Legislators are not ready to unroll their sleeves just yet,” said William Pound, executive director of the National Conference of State Legislatures. “Even though revenue collections are up, almost half the states are not expecting to return to peak revenue collections until sometime between FY 2013 and FY 2016.”
Fiscal conditions are still considered weak and NCSL’s report shows that budget gaps continue to persist. Twenty-three states reported spending overruns in programs like Medicaid, K-12 education and public safety in fiscal year (FY) 2011 budgets. Additionally, new FY 2011 budget gaps have opened in at least 19 states since the beginning of July 2010.
“The improving national economy did help more states close budget gaps in FY 2011,” said Arturo Perez, director of NCSL fiscal affairs division. “But some states still have a long road ahead of them.”
Following on the heels of the significant shortfalls already closed in FY 2009, FY 2010 and FY 2011, projected budget gaps for FY 2012 continue to present an ongoing challenge for states. At least 31 states and Puerto Rico project cumulative budget gaps of $86.1 billion in FY 2012. The loss of funds from the American Recovery and Reinvestment Act (ARRA), increases in caseloads and tepid revenue growth that continue to put the squeeze on state budgets. For FY 2013, 19 states anticipate a cumulative budget gap of $30.9 billion.
NCSL’s new report, State Budget Update: March 2011, provides information on budgets in all 50 states and Puerto Rico. It is based on data collected from legislative fiscal office directors in March 2011. It includes extensive information on:
- New FY 2011 budget gaps.
- FY 2011 tax performance.
- Spending overruns in FY 2011.
- A summary of the current state fiscal situation.
- Projected budget gaps in FY 2012 and FY 2013.
- Projected return to peak levels in revenue collection.
This NCSL budget report continues NCSL's long tradition of providing accurate, comprehensive and nonpartisan data on state finances.
Credentialed members of the media may receive a free full copy of NCSL's "State Budget Update: March 2011." The link to the report provided in this release does not contain links to the detailed 50-state tables. Please contact the press room to obtain a complete copy of NCSL's budget report.
NCSL is a bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.