Posted on 11/21/2003 10:23:14 AM PST by areafiftyone
State government finances are improving, a new survey says, with fewer budget shortfalls, more control over spending and a boost in revenue growth for the first time in years.
Still, the upswing found by a national survey of state fiscal health isn't strong enough to instantly undo the past three years of money problems, the worst states have seen since World War II, according to the National Conference of State Legislatures.
The national bipartisan group's latest survey found:
_Ten states reported budget shortfalls so far this year, worth a combined total of $2.8 billion. A year ago at this time, 31 states reported revenue wasn't meeting expenses, totaling $17.5 billion. Most states begin their fiscal year on July 1.
_Thirty-four states were on target or better with their revenue estimates for the first quarter of the fiscal year July, August and September. Revenues in 16 states failed to reach targets.
_ More than half the states said that they were on target on the spending side of the budget, though 22 were spending more than they had budgeted. Still, that's better than last year, when 29 states were over budget.
The findings dovetail with those of a 50-state analysis conducted by The Associated Press and released Monday. The AP found a brighter financial picture in about two-thirds of the states but widespread caution among government officials.
"It's too early to break out the sunglasses, but the fiscal storm we've endured may be breaking up," said Utah House Speaker Marty Stephens, NCSL president.
"There is now reason for optimism," said the conference's executive director, Bill Pound.
A separate report found that state revenue from July through September grew 4.5 percent, the first overall growth after two years of declines, according to the Rockefeller Institute of Government in Albany, N.Y.
Tax increases accounted for much of the growth, according to Nick Jenny, the report's author. Accounting for legislative changes and inflation, states overall saw only 0.6 percent growth.
States in the past two years approved $20 billion in new or higher taxes.
While the reports were encouraging, the authors took pains to warn that the positive steps seen so far could easily turn for the worse if the economy does not keep improving.
And they also said that many one-time fill-the-gap maneuvers like selling bonds from tobacco settlement money or raiding reserve funds can't be repeated, so that next year's state budgets could bring a return of spending cuts and tax increases.
"Yes, the news is better. But the question is, is it good?" said Corina Eckl, NCSL's senior fiscal analyst. "Is the lack of more bad news good news? A lot of people think it is."
She said that her team's interviews with state budget experts found a great deal of concern over the next budget, which most legislatures will begin considering in January. The survey didn't try to quantify next year's potential budget problems.
For an example of the difficulties, however, consider Virginia.
Democratic Gov. Mark Warner warned Tuesday that his state faces a $1.2 billion shortfall in its next two-year budget. He said lawmakers must reform the state's tax structure.
Without reforms that will bring in more money, the state will face annual budget shortfalls for the rest of the decade, he said.
Medicaid was again a top worry in Virginia, as it is in many states. Kentucky this week estimated that its Medicaid budget alone would be overbudget by $530 million next year, and up to $888 million in 2005.
"I think there's going to have to be some serious debate about what kind of Medicaid program Kentucky wants and what kind of program Kentucky can afford," said state Health Services Secretary Marcia Morgan.
The national survey said that of the 22 states already seeing spending overruns, more than half blamed Medicaid. Other high-cost programs straining budgets include prisons and mental health programs, among others.
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