Despite Fiscal Vigor, Lawmakers Preach Prudence

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Seldom has good news furrowed so many brows.

About 5,000 state lawmakers and policymakers gathered here last month learned that states are in their best fiscal shape in 15 years.

A survey released here at the annual meeting of the National Conference of State Legislatures reported that revenues flowing to state coffers over the past year almost doubled predictions, allowing most states to close fiscal 1995 with healthy budget surpluses.

But rather than celebrate these good tidings, most lawmakers pursed their lips and preached prudence. Caution was the watchword of the meeting; even states with reason to be wildly optimistic about booming economic and revenue growth hedged their bets.

"In some states, it's almost an embarrassment of riches," said Scott Mackey, a tax analyst with the N.C.S.L.

Proceeding With Caution

The tone of the conference reflected the cautious way in which the survey suggested that lawmakers budgeted for fiscal 1996.

The survey included budget information for 34 states and tax data from 44 states. Those state budgets forecast an average revenue growth of 2.9 percent, less than half of the 6.2 percent rate posted in fiscal 1995.

Legislatures also made small tax cuts, if any, despite the promises to cut taxes that echoed throughout the 1994 election season.

Many states, instead, socked away money for next year in "rainy day" funds or budget surplus accounts. (See related story .)

Only three states--Utah, Ohio, and Wisconsin--reported that they would boost K-12 spending by 10 percent or more next year. By contrast, seven states had planned increases of at least that much for fiscal 1995.

Budget forecasters in Utah, where there is strong economic growth, were among the most optimistic. But even they tempered their enthusiasm.

Legislators there cut property taxes this year by $90 million while boosting K-12 spending by 14.2 percent. Even if the nation hits a recession next year, Utah's rapid population growth and booming technology industry probably will sustain the good times, said Leo L. Memmot, a state fiscal analyst.

"You always hesitate to think that it will continue," he said, "but when every other state went through the recession [in the early 1990's], we didn't."

Corrections Spending Up

Other survey findings include:

States cutting taxes by at least 1 percent of their revenues included: Pennsylvania, $281 million; Oregon, $266 million; New Jersey, $260 million; and Michigan, $245 million.
Spending on corrections systems grew at an average rate of 13.3 percent in fiscal 1995, twice the rate of any other major area of state spending.
Behind Utah, the states with the highest growth in fiscal 1996 K-12 spending were: Ohio, 10.4 percent; Wisconsin, 10 percent; Texas, 9.9 percent; and Colorado, 7.2 percent.(See Education appropriations in 1995 rose 7.5 percent.

Vol. 14, Issue 41

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