Report Says States Still Face Economic Woes

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Despite the improved national economy, many states are still struggling to recover from the 1981-82 recession and can ill afford another round of federal budget cuts, according to a recently released National Governors' Association report.

The report, based on a survey of state budget officers late last year, reveals that the 50 states accumulated a $6.3-billion surplus in the 1984 fiscal year, and it estimates they will stockpile about $1 billion less than that this fiscal year.

Surplus Estimates Vary

Taken together, the figures fall considerably short of the recent $86.5-billion Treasury Department projection of cumulative state surpluses by 1989, an estimate that many state leaders took as a sign that the Reagan Administration was prepared to balance its budget at their expense.

Speaking at a Washington news conference late last month, Raymond C. Sheppach, executive director of the nga, dismissed the Treasury's estimate as "rather absurd," and said it was based on faulty as-sumptions about state spending.

He added that the Reagan Administration's recently proposed budget cuts would have a $7-billion impact on state and local governments, and would "wipe out most of the surplus."

Three-Percent Balances

According to Mr. Sheppach, eight states account for more than half of the budget officers' reported surpluses, and a majority of states are working with margins of less than three percent.

"Would you like to run your yearly balances that low?" Mr. Sheppach asked. He said Wall Street analysts consider balances of 5 percent a sign of economic health. Fifteen states report surpluses that high, he said.

He attributed the accumulated surpluses to austerity measures taken by the states in response to the recent recession--measures which he said are now rebounding to their fiscal benefit. Many states that cut spending and increased taxes are now looking to restore programs, he said, while 14 are proposing to cut taxes.

On the other hand, 17 states are expected to increase taxes, he said, evidence that not all state finances are in good shape. Three states--Illinois, Tennessee and Mississippi--are considering tax hikes of more than $100 million, he said.

Middle Atlantic states, which were hardest hit by the recession and in many cases took the most severe austerity measures, have tended to bounce back the fastest, Mr. Sheppach said. But farm states and energy-producing states continue to face tough times.

Revenues, Spending Rise

According to the fiscal survey, real state spending will rise above 1981 levels this year for the first time since the recesssion.

State revenues, it reports, grew by 13 percent in 1984, thanks to "a stronger than expected recovery and the continuation of tax increases necessitated by the recnt deep recession." Expenditures, meanwhile, rose by 8 percent, it states.

Revenues are projected to grow by 7.5 percent in the current fiscal year, while spending is expected to rise by 10.8 percent, according to the report.--jrs

Vol. 04, Issue 24

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