State Budgets: '04 Blacker; '05 Red for Nearly Half

With only two months to go in the 2004 fiscal year for most states, 32 are projecting small surpluses in the end - a sharp contrast to the situation they faced a year ago - according to a new report by the National Conference of State Legislatures (NCSL).

At this time last year, states were still struggling to close a cumulative $21.5 billion budget gap. Now, they are working to close a total gap of $720 million, according to State Budget Update: April 2004.

The surpluses are not large. And they did not accumulate painlessly, the report points out. These projected surpluses are the result of improved collections in major revenue categories and the difficult paring of programs. Nine states expect surpluses below 1 percent of their general fund budgets. In Florida, Nevada, Oklahoma, South Dakota and Wyoming, the surpluses are larger than 5 percent.

But this breathing room comes after three consecutive years of fiscal crisis, when states had to cut funding in such core areas as education, healthcare and corrections. Some states tapped rainy day funds, increased fees or raised taxes on items including cigarettes, health insurance and phone service to help make ends meet.

Presently the black ink for '04 ending balance appears only to be a short reprieve for many states as '05 revenue forecasts and spending projections see 33 states resolving expected budget gaps once again.

Some states are expecting a positive picture, however. At least 12 project surpluses, bringing the cumulative surplus to about $1.9 billion. These surpluses continue to be modest, though, with Hawaii, Ohio, Oregon and Texas reporting surpluses equal to less than 1 percent of their budgets.

Copies of State Budget Update: April 2004 may be purchased from NCSL by contacting 303-364-7700 or books@ncsl.org.