Fiscal footing stable today, uncertain tomorrow.

• Position: TRENDS AND TRANSITIONS - Brief article

Two thirds of the way through most states' fiscal years, budgets were stable and lawmakers were targeting unexpected revenues toward programs that lost resources during lean budget years, according to a spring fiscal report from NCSL.

Between FY 2001 and FY 2005, states closed a collective budget gap that exceeded $265 billion. States began turning the corner in FY 2004, and by this past March, 42 states were projecting positive balances by the end of the fiscal year. The initial estimate was $28.9 billion, but that amount was expected to decline as states targeted unexpected revenues to higher education, capital projects, transportation, unfunded pension liabilities, tax relief and rainy day funds.

The biggest driver of improving budgets has been, and continues to be, better than expected revenue performance. Of the 41 states that had revised their revenue forecasts since the start of the fiscal year, collections were exceeding the new expectations in 18, were on target in another 18, and fell below forecast in only one.

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Eight states reported that all...