1991 State Revenue Growth Rate Slowest in a Decade, Study Finds

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During the first three months of this year, state revenues grew at their slowest rate of increase in well over a decade, according to a survey released last week by the Center for the Study of the States.

Even though lawmakers in 23 states approved tax hikes during their 1990 legislative sessions, recession-weakened state revenues grew by just 0.9 percent during the first quarter of this year, as compared with the same period last year.

Without the tax increases enacted last year, tax revenues would have dropped by about 1.3 percent, according to the Albany, N.Y.-based center.

Adjusted for inflation, the states' total revenue from taxes was down 6 percent during the first quarter, the center found.

The new estimates are down considerably from the final quarter of 1990, in which state tax receipts were up about 6.4 percent.

The report follows other recent national surveys that have pictured a bleak economic landscape in many states, particularly those east of the Mississippi River. The National Governors' Association and the National Association of State Budget Officers recently reported massive budget cuts and tax increases as states struggled to balance their budgets. (See Education Week, April 24, 1991.)

Steven D. Gold, the author of the most recent survey and the director of the center at the Nelson A. Rockefeller Institute of Government, said the recession has left states in their worst fiscal shape since the mid-1970's.

Moreover, Mr. Gold warned in another recent report, state-level funding problems for education may stretch beyond this year's budget woes. Without comprehensive reform efforts or court-imposed finance revisions, Mr. Gold suggested, school spending--which accounts for about a third of the budget in the average state--may undergo continued austerity even after the current recession.

"If the past is precedent, state aid for education will be depressed as long as state fiscal stress lasts," he said. "But the 1990's will differ from the 1980's in one important way--the fiscal environment is likely to be less benign."

Largely because of the escalating state costs for Medicaid and prison programs, even a slow economic rebound "will assure a continuation of fiscal stress," Mr. Gold predicted.

For that reason, he argued, education increases may be slow in coming unless policy makers can find compelling school reforms.

A small number of states, particularly those with below-average teacher salaries or court-mandated reforms, may "sharply" increase school spending, he indicated. "But the outlook elsewhere is not so rosy."

"The pressure will be on to restructure schools in some manner so that educational outcomes show real improvement," he concluded. "Blind faith that more money will produce significant payoffs is on the way out."

Vol. 10, Issue 35

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