More States in 1992 Risk Getting Caught In Budgetary Storm, N.C.S.L. Reports

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This year's legislative sessions in the states are beginning under the same budgetary storm clouds that loomed last year, according to a survey by the National Conference of State Legislatures.

The only difference, the report suggests, is that more of the country stands to get caught in the downpour in 1992.

Tax revenues are running behind estimates in 30 states, the survey of current fiscal conditions found, while more than half of the states report spending levels above appropriations.

Over all, most states have slipped into "poor fiscal condition," the study makes clear, with only the Plains and Rocky Mountain states in relatively strong shape.

In Washington State, for example, which last year was anticipating a $350-million budget surplus, this year's survey showed a dramatic deterioration. Across-the-board cuts are now taking effect, the result of a $700-million shortfall in the state's biennial budget.

"A weak economic outlook, tax revenues below expectations, expenditures above budgets, and a lack of reserves suggest that 1992 will see a replay of the very difficult budget sessions of 1991," says the N.C.S.L. report, adding that states will face a tougher struggle in finding solutions this year.

"Recessions are bad times to raise taxes or cut expenditures; either course can slow economic recovery," the study acknowledges. "But states are likely to see both in 1992, for lack of alternatives."

The survey found indications that the recession is beginning to feed upon itself, as applications for entitlement programs have increased as a result of the tough economic conditions. Medicaid expenditures are over budget in 19 states, and basic welfare funding is costing more than expected in 16 states.

Spending Cuts Favored

The study predicts that legislators are more likely to favor budget cuts over tax increases to ease their fiscal plight. But school spending may be one of the few state programs that might draw enough public support for higher spending, it indicates.

"The conventional wisdom that it is unwise to raise taxes in an election year has been powerfully reinforced by the anti-tax movements in New Jersey and Connecticut," the report notes. "Governors and legislators do not willingly set themselves up as targets, so it is not surprising that the only states where there is much talk of tax increases are those like Tennessee and Colorado where the money would mostly go to local schools."

In painting broad financial trends for lawmakers in 1992, the study predicts:

  • A continued effort to restrain state personnel costs through hiring freezes and layoffs;
  • More Medicaid provider taxes, in an effort to shift more costs of the program to the federal government;
  • Higher tuitions at public universities; and
  • Efforts to curb welfare spending and tighten eligibility requirements.

In keeping with the report's bleak tone, even its few bright spots lose some of their luster on close inspection.

In Massachusetts, which has been among the hardest-hit states over the past three years, tax collections have outpaced expectations. But analysts noted that the fiscal 1992 projections had been set too low. Moreover, Gov. William F. Weld has predicted a $1.6-billion shortfall for fiscal 1993--more than 12 percent of the overall state budget.

N.C.S.L. analysts noted that current prospects for the economy do not offer much reason for optimism. "There is little hope in state governments for improvement in the rest of fiscal year 1992," the study warns. "Deterioration continues slowly."

Vol. 11, Issue 18, Page 18

Published in Print: January 22, 1992, as More States in 1992 Risk Getting Caught In Budgetary Storm, N.C.S.L. Reports
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