”’Editor’s Note: 40 percent of Hawaii’s state Legislature is at this conference being held in San Francisco, CA from July 21 to 25.”’
SAN FRANCISCO – (UPI) The nation’s state legislators were told Wednesday there may be light at the end of the fiscal tunnel and they’re not to blame for the budget gaps of the past three years.
“Good news may be on the horizon,” Angela Monson, president of the National Conference of State Legislatures, said at the NCSL meeting in San Francisco.
“No state is predicting a deficit at the end of the next fiscal year and the state fiscal officers we surveyed are predicting revenues will rebound in the current fiscal year.”
Monson, an Oklahoma state senator, made the comments after the release of the NCSL’s final report on fiscal 2003, which ended June 30 for most states. More than 1,600 legislators are attending the meeting of the bipartisan research group.
The survey included data from all 50 states except California and five others states that were still working on their budgets when the information was collected. The figures from California, which is facing a possible tax increase, could impact the final national figures.
In the past three years states have had to close budget gaps of nearly $200 billion. Three months ago, they still had to close $21.5 billion in shortfalls by the end of the fiscal year but 43 states have balanced their budgets, largely without broad-based tax hikes.
States increased taxes $6.9 billion, or 1.3 percent, compared to fiscal 2002 when they increased taxes 1.6 percent, or $9.1 billion, although the final figures in California and a few others states could push those numbers higher later in the year.
To balance their new budgets, 31 states have cut spending, 23 have laid off state workers, 13 have dipped into rainy day funds, 11 states delayed capital projects or shifted them to pay-as-you go projects, and six states expanded gaming.
“This follows seven consecutive years where state legislatures reduced taxes by $37.5 billion, as much as 2 percent,” she said.
Responding to critics who have said states created their own money woes by reckless spending during the 1990s, the NCSL said state spending as a percentage of the gross domestic product was almost level during the decade, about 9.6 percent to 10 percent.
William Pound, the NCSL’s executive director, said the growth in state spending was attributable to increasing population, the inflation rate, and the general growth of the nation’s wealth from 1991 to 2001. He pointed to two major factors in the rise.
“The growth in state spending can almost be all be accounted for by the growth in Medicaid and all the trend lines we look at today would indicate that will continue to be the case through this decade, unless there are significant changes in that program,” he said.
The second major factor was increased spending for education, not only at the K-12 level in local schools, but higher education across the country, Pound said.
“That was in direct response to a demand of the citizenry to a general concern we’ve had in this society about the adequacy of our educational system, the need for higher standards, not only for teachers but for performance in the classroom,” he said.
Monson, who has served in the Oklahoma Legislature for 13 years, said that state legislatures acted “prudently” during the 1990s to take advantage of better economic times, save money, and try to provide for needs in education and healthcare.
“I think state legislators and governors made some difficult decisions during the ’90s when things were better,” she said. “There was a record number of dollars in rainy day funds, we put money aside for when times would get bad. We gave resources back to our citizens in some tax restructuring and we did spend more where money was needed, particularly in education and healthcare.”
The fiscal 2003 figures reported Wednesday by the NCSL did not include Alabama, California, Connecticut, Nevada, Oregon and Pennsylvania, which had not passed their budgets at the time the data was being compiled.
For nearly every other state, it was the second consecutive year of money woes and they had to make their already enacted 2003 budgets balance by June 30. They resorted to spending cuts, tax increases and even dipping into rainy day funds and retirement funds.
As states tapped reserves to help close 2003 gaps, aggregate year-end balances dropped 48 percent or $22.4 billion from fiscal 2002 to $11.6 billion. Revenues in 2003 were only 0.7 percent above 2002 levels reported from all the 43 states.
In adopting fiscal 2004 budgets, legislatures again faced major challenges although about $20 billion in federal aid was approved for states. However, the federal funds came after most of the lawmakers had already adopted budgets for the new fiscal year and gone home.
States raised taxes and fees in 2003 for the second consecutive year, which should boost revenues for the 2004 fiscal year. Forty-two states reported tax increases totaling $6.9 billion. In addition, states raised fees and other revenues another $3.7 billion.
Only one state — Hawaii — cut taxes by more than 1 percent of 2002 collections.
Seventeen states hiked taxes by more than 1 percent. Delaware, New York, Ohio and Idaho raised their taxes by more than 5 percent, according to the report.
Although all tax categories showed net increases in 2003, sales and use tax increases of $2.8 billion accounted for most of the total increase. Personal income tax increases totaled $1.8 billion and hikes in the corporate income tax another $486 million.
Most states predicted revenue growth will rebound in fiscal 2004, although they remain cautious about spending, the report said state revenues are projected to grow 4.3 percent above last year’s collections in the 43 states.
Most of the increase in fiscal 2004 spending will be because of Medicaid, which is supported by both federal and state dollars. With 36 states reporting, Medicaid is budgeted to grow 4.6 percent, even higher than K-12 education at 1.5 percent.
Copyright 2003 by United Press International. All rights reserved.