by Pauline Vu, Stateline.org Staff Writer
Only three states ran into red ink this year, while more than half sailed through with higher-than-expected revenues. States overall are finishing a spending spree, but the best revenue picture in six years may be behind them.
The nation’s governors expect the growth in spending next year to be cut in half from this year’s dramatic high because of a slowing economy and rising costs, especially for health care.
Only Michigan, Rhode Island and Wisconsin were forced to make mid-year cuts — totaling $170 million — after their current fiscal 2007 budgets had been approved, according to a June 5 report from the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO).
Of that total, $131 million of the shortfall belonged to Michigan, which many economists say is experiencing a one-state recession. The number is small compared to fiscal 2002, when a record 37 states were forced to go back and slash $13 billion to keep their budgets in the black. While New Jersey has not made cuts in fiscal 2007, the Garden State’s budget has “an assumed lapse” of $400 million, the report said.
Collectively, states will have spent $616 billion during the current fiscal year of 2007, which ends June 30 for all but four states. That represents a growth rate of about 2 percentage points above the 29-year historical average increase of 6.5 percent, the report said. The groups expect state spending to grow only 4.2 percent in fiscal 2008, the year many state budget writers are wrestling with now.
The groups’ “Fiscal Survey of States” provides an annual snapshot of states’ finances. This year’s 55-page report features state-by-state data including state spending, revenue and year-end balances for fiscal 2006; preliminary figures for the current fiscal year of 2007 and projected 2008 numbers based on governors’ budget proposals.
Last year, states enjoyed their best budget climate in six years, splurging on new projects ranging from a baseball stadium for the Minnesota Twins to a spaceport in New Mexico. States were making up for lost time, spending on projects that languished during a severe economic downturn that began in 2001.
