Happy days are here again? State surpluses could translate into growth
Higher revenues are chipping away at the massive federal deficit
In many states, revenues are rising more rapidly than spending. As a result, deficits are evaporating in state capitals and governors have begun having once more. Are happy day here again?
America's 50 states aren't allowed to run deficits. "So each year, state legislatures pass, and governors sign, budgets for the next fiscal year in which expenditure are supposed to align with expected revenues. Then, they wait and hope that the revenues actually materialize."
Gross says that this is happening with increasing frequency. For the current fiscal year (fiscal 2013, which started last spring or summer in most states), the level of spending rose just 2.2 percent from fiscal 2012, according to the National Association of State Budget Officers. This figure is below the historical average of 5.6 percent growth per year.
Happily, state revenues are growing more rapidly than spending. "In the fourth quarter of 2012, according to the Nelson A. Rockefeller Institute of Government, state tax receipts were up 5.7 percent from the fourth quarter of 2011. For the full year, revenues probably rose about 4 percent. Now, late 2012 tax receipts were boosted in part because so many companies rushed dividend payments out the door to avoid the prospect of higher taxes."
With revenues rising more rapidly than spending, deficits are dwindling away in state capitals. "It's likely most states will end the year with a slight surplus," Director of State Fiscal Studies at NASBO, Brian Sigritz says.
Gross cites the example set by North Dakota, currently enjoying an energy and agricultural boom. That state is projecting a $1.6 billion surplus over its two-year budgeting cycle. Texas, another state rich in oil and agriculture, foresees an $8.8 billion surplus over its current two-year budget cycle.
Surprisingly, the Rust Belt is also regaining some of its fiscal shine. Ohio is expecting a $1 billion surplus for the current fiscal year. Wisconsin is looking at $484 million in black ink.
Other states with surpluses include Iowa ($800 million) and Tennessee ($580 million). West Virginia completed its 2011-12 fiscal year with a surplus of about $88 million.
The one state with a gloomy forecast is known by this currently ironic moniker "the Golden State," California. "For the past several years, California's massive, recurring deficits have made life miserable for politicians and inspired comparisons to Greece."
However, there is a silver lining. "Thanks to tough spending cuts, higher taxes, and a general recovery, California's finances are on the mend.
"California expects to take in $2.4 billion more in revenue than it will spend this fiscal year, which ends June 30," Tami Luhby of CNN Money reports. "After paying off a shortfall from last year and setting aside funds for upcoming obligations, it's on track to end the year with a $36 million surplus."
© 2013, Distributed by NEWS CONSORTIUM.
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