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| Report: States in Better Financial Shape |
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(August 29, 2006) --
An unexpected surge in revenues has left year-end balances in some states at the highest levels in decades and allowed a number of states to replenish rainy day funds, bolster support for education, and reduce their reliance on property taxes, according to the National Conference of State Legislatures latest survey of state finances.
"Not only do we have the rebounding economy to thank for this, we also should applaud the diligent work of state legislators across America who've been smart managers of public money," said NCSL President Steve Rauschenberger, an Illinois senator. "State legislators have learned from the budget crisis of the early part of the decade, as we can see by the prudent choices they're making now."
In the vast majority of states, the new fiscal year begins in July.
Healthier Balances at Year-End
When the books closed on fiscal year 2006, state revenues were up by 7.7 percent, with states overall finishing the fiscal year with nearly 25 percent more money in year-end balances than they had at the end of fiscal year 2005.
Overall, 28 states ended fiscal year 2006 with a higher year-end balance. In 19 states the balance dropped and in two states it stayed the same. No state ended the year with a deficit, although Arkansas had a zero balance.
For fiscal year 2007, 25 states plan to use the new revenue to increase reserve funds. Additionally, 24 will boost spending for K-12 education and 20 will put money toward higher education. Other increased funding for correctional facilities, Medicaid funding, and transportation.
Less Reliance on Property, Income Taxes
Additionally, the report notes that states cut personal income taxes by nearly $600 million and corporate and business taxes by $124. "They also took steps to help localities offer property tax relief."
New Jersey, South Carolina, and Texas reduced reliance on property taxes in favor of other revenue sources. Other states including Indiana, Kansas, and Maryland provided targeted property tax relief.
Still, legislative fiscal directors, according to NCSL, worry about potential "structural deficits beginning as early as fiscal year 2008." In fiscal year 2007, NCSL expects spending to outpace revenue and state balances to fall by 29 percent. Education, Medicaid, health care, and corrections will account for the increase in spending.
- By Camilla McLaughlin for REALTOR® Magazine Online |
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