Academic journal article The Journal of Government Financial Management

NGA/NASBO Release State Survey Data

Academic journal article The Journal of Government Financial Management

NGA/NASBO Release State Survey Data

Article excerpt

Washington, D.C. (June 26, 2003)-As the fiscal year came to a close, budget data released by the National Governors Association (NGA) and National Association of State Budget Officers (NASBO) indicate that states continue to struggle with declining revenues amidst an uncertain economy, with most states unable to protect their highest priority programs from budget reductions.

According to the latest Fiscal Survey of the States, based on state budget data collected during spring 2003 by NASBO, most governors chose spending reductions coupled with revenue increases and drawing down their remaining reserve funds to balance budgets amidst ongoing tight fiscal conditions.

Fiscal 2003, which ended June 30, was a grueling year for the majority of the nation's governors. Thirtyseven states were forced to reduce already enacted budgets by nearly $14.5 billion-the largest spending cut in the history of the 27-year-old Fiscal Survey.

"In this report we find the fiscal condition in the states has not improved; balancing state budgets continues to be a difficult exercise," said Scott Pattison, NASBO's executive director.

Governors in 29 states recommended tax and fee increases in fiscal 2004, resulting in a net increase of $17.5 billion-the largest since 1979. Furthermore, state spending growth was cut to only 0.3 percent in fiscal 2003 and is expected to decline 0.1 percent in fiscal 2004.

According to the survey, the strategy has remained the same in almost every state-across-the-board, targeted reductions to programs. Few states have succeeded in exempting high priority programs such as K-12 education, Medicaid, higher education, public safety, or aid to towns and cities.

"If economic conditions remain stagnant or worsen and if budget shortfalls continue next year, the states will have exhausted many of their options for countering a weak economy. The future of these programs, which represent the highest priorities for states, could be in greater jeopardy," said Pattison.

Facts from the survey indicate that governors used a wide variety of budget management tactics in an attempt to balance their budgets in fiscal year 2003: 28 states used across-the-board cuts; 22 states drew down their rainy day funds; 17 states laid off employees; eight states offered early retirement; and 10 states reorganized agencies and programs.

A variety of other measures were used in 29 states, including refinancing state debt, hiring freezes, tobacco settlement securitization, deferred payments and fund transfers.

"Governors have reigned in spending over the past two fiscal years, with most states reporting growth rates less than the previous years. The trend will continue next year-a record high 19 states have proposed negative growth budgets," said NGA Executive Director Raymond Scheppach.

However, growth in Medicaid continues to put a severe strain on state budgets. The pressure is coming from increased state costs for pharmaceuticals and increased enrollments in Medicaid, according to a recent report from the Kaiser Commission. …

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