A report by the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO) indicates a small glimmer of hope for state budgets in fiscal year 2011. The Fiscal Survey of States found that after two of the most challenging years for state budgets, 2011 will present a slight improvement over fiscal 2010:
- General Fund spending declined by 7.3 percent in fiscal 2010 but is expected to increase, based on states’ enacted budgets, by 5.3 percent in fiscal 2011. However, even with this increase, General Fund spending in 2011 will be $42 billion, or 6.2 percent, lower than fiscal year 2008.
- General Fund revenues declined 2.5 percent in 2010. States are projecting a 4.4 percent increase in General Fund revenue collections in 2011. However, even with this General Fund revenue increase, revenues for 2011 are $43.7 billion, or 6.5 percent below fiscal 2008 levels.
Adding to the stress on state budgets, the report points out that fiscal year 2012 marks the beginning of the end of state funding that had been made available by the American Recovery and Reinvestment Act.
“Even with a slight improvement over fiscal 2010, fiscal 2011 is expected to be another very difficult fiscal year for states,” said NGA Executive Director Raymond C. Scheppach. “Spending and revenue is unlikely to return to pre-recession until 2013 or 2014. Since the recession began, states have had significant revenue declines and in order to balance their budgets, have made significant cuts and in some cases enacted tax and fee increases. The end of Recovery Act funding in 2012, along with the growing pension liability and the rise of Medicaid enrollment could further exacerbate the already tight fiscal conditions. Finally, the potential impact of health care reform in 2014 is a real unknown at this time.”
The field survey on which this report is based was conducted by NASBO from August through October 2010.