It took eight long years, but stable, moderate spending and revenue growth in most state budgets have returned to the level prior to the Great Recession. A report from the National Association of State Budget Officers (NASBO) this week notes that state budgets for Fiscal Year 2016 as a whole have finally returned to their pre-recession levels, but there are exceptions.
The report also states that an annual growth rate of 5.5 percent for FY 2016 represents the highest rate for state spending in nearly 10 years. And total general fund spending among the states is expected to be about $797 billion in FY 2017.
State officials are apparently seeing the light at the end of the tunnel, as governors’ proposed budgets for FY 2017 for the most part are recommending spending increases, although modest. Forty-three of the states are anticipating growth in spending from FY 2016 to FY 2017. And because they’ve “been there, done that” in dealing with revenue shortages as a result of a major economic downturn, many governors are also advocating for increased allocations to rainy day funds. If another Great Recession comes along, they’d like to have a little cash in reserve.
With declining revenues and growing expenditures, many states have seen their contributions to their rainy day funds decline after the Great Recession. Those savings totaled only $3 billion post-recession, but have since steadily increased and now total more than $30 billion.
Of the more than 20 states that report spending lower than 2008 pre-recession figures, more than a half dozen are energy-producing states that cited declining oil prices as one reason for waning general fund revenue. Texas, one of the major oil-producing states that depended heavily on oil and gas revenue for its budget, would have been among those states if not for efforts in recent years to diversify its revenue sources.
Also predicted in the NASBO report is a moderate increase among the states collectively regarding general fund revenues. Tax revenues are expected to total more than $810 billion in FY 2017, up from the more than $787 billion collected in FY 2016. And many states are hoping to shore up their income through increases such as those proposed in Pennsylvania on sales, personal income, cigarette and other taxes. Other states, such as Louisiana, are proposing increased sales taxes. Those tax increases are made necessary due to increased spending needs in major state budget categories such as health care, transportation and education.
Following are some examples showing the difference in resources, expenditures and rainy day fund balances for FY 2016 and projected FY 2017 figures for select states:
California
- FY 2016 – $121.2 billion in resources, $116 billion in expenditures and $8.6 billion in its rainy day fund.
- FY 2017 (projected) – $125.8 billion in resources, $122.6 billion in expenditures and $10.2 billion in its rainy day fund.
Florida
- FY 2016 – $31 billion in revenues, $29.3 billion in expenditures and $1.35 billion in its rainy day fund.
- FY 2017 (projected) – $31.2 billion in revenues, $29.4 billion in expenditures and $1.38 billion in its rainy day fund.
New York
- FY 2016 – $77.5 billion in resources, $72.5 billion in expenditures and $1.78 billion in its rainy day fund.
- FY 2017 (projected) – $73.7 bill in resources, $70.6 billion in expenditures and $1.79 billion in its rainy day fund
Texas
- FY 2016 – $57.7 billion in resources, $53.4 billion in expenditures and $9.67 billion in its rainy day fund.
- FY 2017 (projected) – $56.8 billion in resources, $52.5 billion in expenditures and $10.39 billion in its rainy day fund.
These projected upticks in state government revenues and state spending not only mean good news for the economy, but also can lead to more contracting opportunities for private-sector firms seeking to sell to government, more jobs and increased opportunities for collaboration between public and private entities through public-private partnerships (P3s/PPPs).