WASHINGTON (MNI) – The following is the text of a statement Tuesday
by the National Governors Association and the National Association of
State Budget Officers on their latest fiscal survey. They warn that,
“The downward revision last week in the estimates for economic growth,
the continued fiscal exigencies of the federal government, weakness in
housing and the inexorable growth in Medicaid spending all mean there is
little relief in sight for state budgets.”

While the overall fiscal condition of states has improved from the
depths of the recession, the Fall 2011 Fiscal Survey of States, released
today by the National Governors Association (NGA) and the National
Association of State Budget Officers (NASBO), shows that states are
facing a ‘big squeeze’ from both local and federal governments.

The combination of the effects of the economic downturn, tepid
economic growth and the expiration of Recovery Act and other federal
funds has severely impeded the growth of state resources. Additionally,
spending on Medicaid is expected to consume an increasing share of state
budgets and grow much more rapidly than state revenue growth, resulting
in slow or no growth in education, transportation or public safety.

Overall, state 2012 enacted budgets include nearly $667 billion in
general fund expenditures, a 2.9 percent increase compared to $648
billion in general fund spending in 2011. Despite the second year with
an increase, total enacted general fund spending in 2012 is still $21
billion less than the pre-recession high of $687 billion in 2008.

At the same time, local government revenues have been severely
impacted by the decline in housing values. Many local governments,
including school districts, rely heavily on property taxes to support
their activities. These jurisdictions have been pressing states for
more local assistance.

“State governments are feeling the squeeze from the demands for
spending from both local and federal governments,” said NGA Executive
Director Dan Crippen. “Revenues are up slightly, but they do not yet
meet 2008 levels, and the reduction of federal funds compounds the
fiscal challenges for states.”

Although state general fund revenues increased in both 2011 and
2012, the dramatic declines in revenue collections experienced in 2009
and 2010 leaves total general fund revenues in 2012 $21 billion below
their 2008 level. Specifically, revenue collections in 2012 reflect a
5.2 percent increase in personal income tax revenue and a 0.1 percent
decrease in corporate income tax revenue and, in addition, a 0.3 percent
decrease in sales tax revenue (in part because of the end of temporary
sales increases in a few states). This growth will likely not be enough
to even overcome the reductions in federal funds provided through the
Recovery Act that began in 2011.

“This report shows that state budgets are certainly improving,
however growth is weak and there is not enough money for all of the
bills coming in,” said NASBO Executive Director Scott Pattison. “State
officials will still be cutting some programs and increases in funding
for any program except for health care will be rare.”

The downward revision last week in the estimates for economic
growth, the continued fiscal exigencies of the federal government,
weakness in housing and the inexorable growth in Medicaid spending all
mean there is little relief in sight for state budgets.

** Market News International Washington Bureau: 202-371-2121 **

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