Improved budget outlook may be temporary for states

News AASHTO Journal August 25, 2006
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States ended fiscal 2006 with $57.1 billion in surpluses, up from $45.8 billion the previous year, according to figures recently released at the annual meeting of the National Conference of State Legislators (NCSL) in Nashville, Tenn.

That $57.1 billion figure represents 10.2% of states' general-fund spending in fiscal 2006, a signal that states have rebounded from the dire fiscal straits experienced earlier this decade.

But the NCSL's budget analysts warn that the picture may soon change, as state spending begins to surpass incoming revenue, beginning this fiscal year.

"Legislative fiscal directors in many states worry that state spending will outpace ongoing revenue growth over the longer term, leading to structural deficits beginning as early as fiscal year (FY) 2008," NCSL said in its "State Budget and Tax Actions 2006" report.

The NCSL reports that overall FY 2007 general-fund spending is budgeted to grow by an average of 7.6% in the 49 reporting states. But since revenues are projected to grow by only 3%, future state balances are projected to fall by 29% by the end of FY 2007. Copies of the full report are available from the NCSL bookstore at www.ncsl.org/bookstore.

During its weeklong meeting, legislators heard from Federal Express Corp.'s Chairman and CEO Frederick W. Smith and from Homeland Security Secretary Michael Chertoff.

Prior to the kickoff of the conference on Aug. 15, the NCSL conducted a one-day Energy Summit on Monday, Aug. 14. The summit was focused on a number of state issues including:

• short- and long-term energy options for power, transportation and heating fuels;

• ways to stabilize fuel prices;

• the role that alternative fuels and new technologies will play in the nation's transportation sector; and

• methods to improve security and reliability of energy infrastructure.

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