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States Face Minimal Turbulence as New Fiscal Year Takes Off

Because of deadlines built into the budgeting process, most states completed their spending plans well before the start of the new accounting period.

By Erica MacKellar  |  July 25, 2023

Happy Fiscal New Year!

For most of us, Dec. 31 is the day we don our party hats and ring in the New Year. But if you are a state budget writer, you might break out the noisemakers at midnight on June 30 instead.

Forty-six states begin their fiscal years on July 1. The exceptions are New York, which begins its one-year accounting period on April 1; Texas, which begins its period on Sept. 1; and Alabama and Michigan, which begin theirs on Oct. 1. Why the exceptions? New York originally began its fiscal year on July 1 but changed it to April 1 in 1943 for financial planning purposes, according to the state budgeting division. The Sept. 1 start in Texas reflects the state’s agricultural past. And it’s likely that Alabama and Michigan decided to align their fiscal years with the federal fiscal year, which also begins on Oct. 1.

Ensuring an On-Time Budget

Most states complete their budgets before the start of the new fiscal year. In fact, while July 1 is the drop-dead date for many states to have a budget in place, there are often other deadlines built into the process. The biggest internal deadline is the short nature of legislative sessions. Thirty-nine states have limits on legislative sessions, so many states cross that budget finish line well before the clock strikes midnight on June 30.

In addition to session lengths, there are other internal processes legislatures use to complete their budgets on time. For example, lawmakers in Michigan, where the fiscal year starts Oct. 1, face a statutory requirement to send the budget to the governor by July 1. The Utah Legislature must pass a base budget containing about 95% of total spending within 15 days after the beginning of session, with the remining budget decided within 40 days of the start date. California lawmakers must send budget bills to the governor by June 15 or their legislative pay is suspended. In short, while most state fiscal years begin on July 1, many states finish their budget work long before that deadline.

Most States on Schedule, a Few Need Time

Despite the smooth sailing for most states this year, a few faced challenges. In New York, a budget agreement was not reached until late April, and the budget was not enacted until the first week in May—over a month after the April 1 fiscal start date.

The Ohio Legislature passed a deadline extension bill to allow Gov. Mike DeWine a few days to review the final spending plan, and in Wisconsin, spending automatically continued at the previous year’s level until Gov. Tony Evers signed the bill on July 5.

North Carolina, one of three states where the Legislature has yet to pass a budget, also has a provision that allows funding to continue until a new plan is in place. Legislative leaders are expected to hammer out differences in their budget priorities throughout the summer.

Massachusetts, another state still without a spending plan for this year, is no stranger to late state budgets. The Legislature typically passes a budget just a few days before the July 1 deadline, but Gov. Maura Healey has 10 days to review the completed bill. To avoid a government shutdown or disruption for that period, the Legislature also passes a temporary spending plan to allow for the review. This year is unusual in that the Legislature is negotiating past July 1, but a temporary spending plan is in place, allowing lawmakers some leeway to come to agreement.

Pennsylvania has had several late budgets over the years and is again operating without a spending plan in place. Unlike the other states still negotiating, Pennsylvania does not allow for spending to continue automatically, and there is no temporary plan in place. Court rulings from past budget impasses ensure that funding for many state services will continue, but long delays in the budget could eventually strain local governments and other entities that rely on state aid. While reasons for late state budgets can vary, Pennsylvania’s situation is unique because the budget is complete. The Legislature has passed the budget, but because of a disagreement with Gov. Josh Shapiro, the Senate has not convened to take the technical steps necessary to send the bill to his desk. It’s unclear how long the state will be operating without a new plan in place.

Erica MacKellar is a program principal in NCSL’s Fiscal Affairs Program.

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