Econ Piggy

According to The National Association of State Budget Officer's State Expenditure Report, total state spending (including both state and federal funds) grew by an estimated 5.7 percent in FY 2014, a significant jump from the 2.2 percent growth rate in FY 2013. In FY 2012, year-over-year total state spending fell by 1.1 percent. The recent boost in state expenditures is due primarily to a jump in spending from federal funds, which increased by 7.6 percent in FY 2014. Spending from state funds, on the other hand, grew by 4.8 percent.

Fiscal conditions for states continued to moderately improve in the 2013 fiscal year. Revenue collections exceeded projections for the vast majority of states and spending from both state funds and federal funds experienced stronger growth in comparison to the 2012 fiscal year. Additionally, the number of states making midyear budget cuts remained low and states have continued to replenish their rainy day funds and reserves. In the 2014 fiscal year, states are expected to have continued positive revenue and spending growth. Revenue and spending growth rates, however, are expected to be slower than last year. States are cautiously optimistic that fiscal conditions will continue to slowly improve in the 2015 fiscal year and beyond, although challenges remain.

State fiscal and economic indicators continue to slowly improve as the effects of the Great Recession continue to linger. For more than a year and a half, state tax collections have consistently grown and states have invested in rainy day funds. On a per capita basis, state general expenditures declined slightly in 2012 over 2011 levels and education and public welfare remained the largest components of state spending in 2012—65.5 percent.

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A few months after it ranked first in a national study of state spending transparency, Indiana has taken another step to provide more information online to the public. The Management and Performance Hub opened this summer. It includes details on the state budget, public retirement system and tax revenue. The site also lists and tracks indicators of performance for various state agencies.

Economic recovery from the Great Recession has been slow and painful and for many states, revenues are only now getting back to pre-recession levels. While the recession took states on a fiscal roller coaster ride, it also helped reveal the importance of planning for hard times long before they arrive and having a strategy in place to manage volatility. A new series of reports by The Pew Charitable Trusts aims to provide state policymakers with a roadmap to help manage fiscal ups and downs and uncertainty. The first report in the series, "Managing Uncertainty," looks at volatility across the 50 states, noting that the drivers of economic and revenue volatility vary widely.

A recent report by the Center on Budget and Policy Priorities (CBPP) revealed that education is still feeling the economic sting of the recession. State budgets reflect per pupil expenditures in 35 states are lower than in 2007-2008 when adjusted for inflation, and 14 states have effectively cut funding per student by over 10 percent in the last six years. 

Governors are releasing their budget proposals for fiscal year 2015, which for most states will begin on July 1, 2014. Seventeen states previously enacted two-year budgets covering both fiscal years 2014 and 2015. The National Association of State Budget Officers has compiled a comprehensive list of links to proposed and previously enacted budgets for states and territories - check it out here: National Association of State Budget Officers.

Jennifer Burnett, CSG Program Manager, Fiscal and Economic Development Policy, outlines the top five issues for 2014 related to fiscal and economic development policy, including pervasive federal instability, a sluggish recovery, soaring health care costs, a stagnant labor market and new demands on state resources for economic development.

The current economic malaise and austerity have forced governments to make painful choices and might lead to what some are calling an “intergenerational civil war.” According to a recent article by Newsweek, the US spends more on the elderly than the young. While that fact by itself is not surprising or new, the article attempts to trace out some potential issues with that continued trajectory. According to the Urban Institute's Kids Share study, public spending on children in 2008 (in current dollars) came to $12,164 per child, with about a third of that total coming from the federal government and two-thirds from state and local levels, mostly via education spending.  The elderly by contrast received about $27,117 per person and mostly from the federal government via social security, Medicaid and Medicare.

The State Budget Crisis Task Force, established by Richard Ravitch and Paul Volcker, examined major threats to state fiscal sustainability, including federal deficit reduction, underfunded retirement promises, rapid Medicaid growth, and narrow and eroding tax bases. It recommended better federal-state communication, improved state budgeting and reporting practices, and broader state tax bases.
 

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