State of the states.

• Author: Perez, Arturo
• Position: Finance

MOST STATES ARE IN PRETTY GOOD FINANCIAL SHAPE AS THEY PREPARE TO WORK ON THEIR 1997 BUDGETS. THE PROBLEM THIS YEAR IS UNCERTAINTY ABOUT THE FEDERAL BUDGET.

As states begin 1996, the outlook is mixed for the economy, consumer spending, revenue collections and program expenditures for the remainder of the year. So says a December 1995 survey of legislative fiscal staff asked to compare state general fund collections so far in FY 1996 with original revenue projections - those on which budgets for FY 1996 were based. Although states are generally having little difficulty in keeping program expenditures on target, more states than last year are dealing with weak economies that are affecting revenue performance. Overall, however, most states are in pretty good shape as they prepare to work on their budgets for the coming fiscal year.

Most of the 22 jurisdictions reporting above-target collections are found in the Far West, Plains and Southeast regions. Five states - Arizona, Arkansas, Indiana, Iowa and Missouri - report revenues at more than 5 percent above forecast through the first five months of the fiscal year. Arizona reports that strong corporate and personal income tax collections are driving up the total while Indiana attributes its financial health to good performance by nonfarm personal income taxes.

Nineteen states report that collections remain as originally forecast and are expected to remain on target through the end of the fiscal year.

This year 10 states and the Virgin Islands report year-to-date revenues below projections. (This compares to only two states in last year's survey.) Hawaii's general excise tax collections are not meeting expectations as tourism remains in a tailspin for the second year in a row. Idaho blames its lower collections on sluggish performances by sales and personal income taxes. In Kansas, personal income tax collections are weak. Maryland reports that poor sales tax collections and the problems of furloughed federal employees have affected total general fund collections. South Dakota overestimated the revenue from an expanded sales tax. Smaller than anticipated personal income and sales tax collections are responsible for total revenues being under estimate in Rhode Island.

MEETING REVENUE TARGETS

The survey found that 22 states' revenues are on target (plus or minus 1 percent), 19 states and Puerto Rico are more than 1 percent above target and 10 states and the Virgin Islands are more than 1 percent...