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NGA, NASBO Say States Recovering, Not Recovered

The National Governor's AssociationJune 3, 2011

WASHINGTON-State budgets are recovering, but have not returned to pre-recession levels of 2008, according to the biannual report, The Fiscal Survey of States, released today by the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO). As the federal government tries to get its fiscal house back in order, Washington might look to the states for lessons in good fiscal stewardship.

While spending is expected to increase next year by 2.6 percent after rising 5.2 percent this year, spending will still be below where it was in 2008. General fund spending, at nearly $669 billion, is expected to be $19 billion lower in fiscal 2012 than fiscal 2008, a 2.7 percent decline.

General Fund revenues rose 5.9 percent in fiscal 2011, but 2012 revenues are still below 2008 levels. Recommended budgets for fiscal 2012 forecast a 3.9 percent increase in total tax revenue. Sales taxes increased by a scant 0.3%. Total General Fund revenues remain 3.6 percent below their pre-recession highs despite tax increases in several states.

Additionally, states face the expiration of enhanced Medicaid funds from the American Recovery and Reinvestment Act of 2009 (Recovery Act). State spending of flexible Recovery Act funds has declined drastically from $60 billion in fiscal 2010 to $50 billion in fiscal 2011 to just under $3 billion in fiscal 2012. Despite the expiration of Recovery Act funds, states nonetheless are locked into Medicaid spending by federal requirements.

While the worst may be over in the near-term for most states, all continue to adjust. Following adoption, 23 states cut their enacted fiscal 2011 budgets by $7.8 billion. Total balances are estimated to be $32.6 billion, or 4.9 percent of expenditures (2.5 percent without Alaska and Texas), based on fiscal 2012 recommended budgets.

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