Congress Approves Vast Spending Bill
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Spending like the good times are back again, state governments poured money into health care and education this year, a new report says, while tax cuts are looking increasingly attractive for next year.
Overall, states have ramped up spending at a rate that hasn’t been since 1999, as tax revenues have come in higher than expected for nearly all states, the National Governors Association and the National Association of State Budget Officers reported yesterday.
The survey warned of dangers ahead, particularly from health care costs and the likelihood that tax income won’t continue to grow as it has for the past few years.
“Health care spending – including Medicaid and health benefits for state employees _ accounts for about one third of state expenditures, and spending growth in this area will strain future state budgets,” said Scott Pattison, NASBO’s executive director.
The group, with responses from 49 states, examined finances for the current fiscal year as well as forecasts for the fiscal year that begins in July. In all but four states, the fiscal year runs from July 1 through June 30.
The findings showed a continuing trend of widespread fiscal stability, a stark turnaround from the harsh downturn of 2001-2002, with aftereffects that lasted through fiscal year 2004.
Among other findings, the report said:
* State general fund spending rose by 4.2% this year over the year before. That’s the fastest it has risen since 1999, once numbers are adjusted for inflation.
* Tax revenues were higher than expected in every category, from sales taxes to personal income taxes to corporate income taxes.
One warning sign, however, was that state reserves and rainy-day funds were slowly dropping, from 8.7% of spending in 2005, down to 7.9% this year and estimated to fall to 5.2% in the fiscal year that begins next month.
Another budget group, the Center for Budget and Policy Priorities, warned last month that fiscal conditions may be volatile in at least 20 states, with budget deficits on the horizon.
The governors’ survey also found that tax cuts are becoming increasingly common in governors’ budget proposals for next year, with 20 states proposing tax cuts and 11 proposing increases.
