State general fund budgets grow while revenue slowdown continues.


State general fund spending is on track to grow moderately for the seventh consecutive year in fiscal 2017, according to the National Association of State Budget Officers (NASBO) Fall 2016 Fiscal Survey of States. Progress since the Great Recession has been slow, however, and 32 states still spent less in fiscal 2016 than the pre-recession peak in fiscal 2008, after accounting for inflation. Fiscal improvement has also been uneven across states. For example, while 11 states increased general fund spending by six percent or more in fiscal 2017, eight states enacted budgets that call for less spending in fiscal 2017 than in the prior year. This variation is due to a number of factors, such as the negative impact of declining oil and gas prices on energy-producing states, differing tax and spending policies, regional economic disparities, and varied changes in population and other demographics.

There is evidence that many states are seeing softening state tax collections. General fund revenue growth slowed considerably in fiscal 2016, after fairly robust growth in fiscal 2015, necessitating mid-year budget reductions in some states, NASBO reported. Revenues came in less than budgeted in 25 states in fiscal 2016--the most since the Great Recession--and many states are seeing these weaker revenue conditions carrying into fiscal 2017. At the time of data collection, 24 states reported general fund revenues for fiscal 2017 were coming in below forecast --the highest number of states expecting revenue shortfalls at this time in the fiscal year since fiscal 2010. States also face rising spending demands and long-term budget pressures in areas including health care, education, infrastructure and pensions. Despite these budgetary challenges, most states continue to strengthen their rainy day funds, with 29 states making deposits into these funds in fiscal 2016, and 25 states projecting increases for the current fiscal...

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