State Fiscal Conditions

On February 4, Scott Pattison, Executive Director of the National Association of State Budget Officers (NASBO), spoke to the Tax Economists Forum, a Washington, DC based group of public finance economists, about the current condition of state finances and the outlook for the future. To briefly summarize Mr. Pattison’s presentation: the current fiscal condition of state governments has improved somewhat when compared to fiscal years 2013 and 2014, but have not yet completely recovered from the Great Recession. States, as a whole, face significant challenges in both the near- term and the long-term. Some of the challenges facing state governments include: an aging population requiring expensive health care and other social services; some states will be forced to accommodate large numbers of immigrants; and declines in federal spending, both in terms of decreased grants-in-aid and indirect cuts such as reductions in defense spending.  Expenditures for K-12 education are expected to increase by $11.1 billion in the coming year, the largest increase of any spending category.
Although state tax revenues have been growing recently, inflation adjusted revenue levels have not yet returned to 2008 levels. States will have a difficult time if economic growth does not accelerate as their combined balances are expected to be 7.3% of their expenditures at the end of this fiscal year; down from 8.9% in 2014 and 10.5% in 2013.

A link to Mr. Pattison’s presentation is provided here.