NGA and NASBO Release State Expenditures, Trends Report

The National Governors' Association (NGA) and the National Association of State Budget Officers (NASBO) released the results of the annual Fiscal Survey of States. The report incorporates information gathered by NASBO from January through April 1997, and includes actual figures for fiscal 1996, preliminary figures for fiscal 1997, and numbers contained in Governors' proposed budgets for fiscal 1998.

The April edition of The Fiscal Survey of States says that although 1997 will be the seventh year of economic recovery nationwide, governors are not calling for program expansions but are adhering to the principles of efficiency, austerity, and improved management.

According to the report, governors are proposing moderate spending increases and modest tax cuts and are maintaining surpluses that prepare their states for uncertainties in the future. This action reflects governors' efforts to heed the public's desire for smaller government, to restrain spending, and to prepare for level federal funding to help reach the goal of a balanced budget by 2002. In addition, cutbacks in discretionary federal spending in the form of grants to states, limits on the growth in the Medicaid program, and proposed federal tax cuts will all impact state budgets.

Highlights of the April 1997 edition of The Fiscal Survey of States include:

• The outlook for economic growth in the regions is positive, with less variance among regions in the rate of growth than in the past.
• States are expected to increase their general fund spending by only 4.5 percent in fiscal 1997 and 3.6 percent for fiscal 1998.
• Medicaid spending is now growing at more moderate levels after years of double-digit growth rates.
• For the fourth consecutive year, states are positioning themselves to reduce taxes and fees.
• Twenty-five states are proposing tax reductions, with the most significant reductions in the personal income tax. Recommended tax increases are predominantly for cigarette taxes.
• States are maintaining reserves to help manage economic uncertainties. While end of year balances for fiscal year 1996 and 1997 were above 6 percent, they are expected to drop to just 5.1 percent in 1997.

The most common budget trend cited is the move toward performance-based budgeting, either through a statewide effort or more emphasis on outcomes during budget deliberations. Other directions states are taking include reorganizing government through mergers and consolidations, privatizing certain services, eliminating government functions and departments in order to downsize state government, and reviewing state operations through governors' commissions.

Copies of the report are available for $25 plus $5.95 shipping and handling from NGA Publications, P.O. Box 421, Annapolis Junction, Maryland 20710, 301/498-3738.