State Governments Learn To Live With Less, Survey Finds

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State governments are learning to survive during an extended period of modest and uneven economic growth that could linger through the end of the century, a new report suggests.

An annual survey released last month by the National Governors' Association and the National Association of State Budget Officers found that the states' fiscal condition has improved somewhat, due more to the adoption of frugal budget habits than to a revival of the economy.

Fiscal 1993 budget growth rose slightly over fiscal 1992, the report says, while mid-year budget cuts were down. Only 22 states were forced to make mid-year budget cuts, compared with 35 in fiscal 1992.

Over all, state general-fund budgets are expected to grow by an average of 3.3 percent in fiscal 1993 and 4.6 percent in fiscal 1994.

Observers said they see a sign that state lawmakers are beginning to learn to live with less in the $3 billion in new taxes projected across the country. Not only is that figure a tiny fraction of state spending--about 1 percent of general-fund budgets--but it also will be raised largely through extension of existing temporary taxes.

States will face program cuts or tax increases in order to balance their budgets for years to come, said Raymond Scheppach, the executive director of the N.G.A.

"There will be no additional revenues to assume more domestic responsibilities from either the federal government or local governments,'' he said. "States will continue to struggle.''

Education's Slow Growth

While focusing on the overall state fiscal picture, rather than specific programs, the report shows that education spending remains in a pattern of slow growth. Elementary and secondary education continues to be largely exempted, however, when states are forced to make cuts due to unforeseen revenue shortfalls.

The report notes that state spending accounted for 47.2 percent of public elementary and secondary school budgets in 1991-92, followed by local funds at 46.1 percent and federal dollars at 6.7 percent.

Among other trends, the report found that state efforts to reform Aid to Families with Dependent Children and other welfare programs are encouraging participants to seek training or find jobs, rather than making adjustments to benefits.

Beyond the existing spending pressures, state officials said, national health-care reform and limited federal spending are likely to increase pressure on state spending over the next few years.

Copies of "The Fiscal Survey of the States'' are available for $25 each from the N.G.A., 444 North Capitol St., Suite 267, Washington, D.C. 20001-1512; (202) 624-5300. Specify the report dated October 1993.

Vol. 13, Issue 10

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