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States’ fiscal picture improves with growing economy

August 16, 2018

The ability of states to deliver the services promised to its residents relies on their fiscal soundness. With most states beginning their fiscal year in July, SSTI has reviewed the current fiscal standing for each state and here presents a snapshot of our findings.

Most states ended their fiscal year with a surplus and continue to recover from the Great Recession, with a growing economy and job gains. However, they face continuing demands on their budgets, with expanded Medicaid payments and the growing opioid crisis confronting nearly every state. Such decisions affect the state’s ability to fund innovation efforts, from the amount of support available for higher education and STEM programs, to funding for entrepreneurship, and forging public private partnerships to strengthen innovation programming that the private sector cannot fully support.

Our analysis found that some states that rely on the energy sector to fund their spending priorities continue to struggle, while others are already factoring in anticipated revenues as a result of new Supreme Court rulings involving gaming and online sales tax collections.

Alabama

While the state’s FY 2017 budget closed with a surplus of $128 million, including $34 million more in revenue than projected, the state was projected in January to have a shortfall in FY 2018. Similar to other states that started the fiscal year with projected budget shortfalls, Alabama has seen an increase in revenue. With two months left in Alabama’s fiscal year, the state projects a 4.6 percent increase in revenue over the previous fiscal year. In total, the state is projected to raise $7.7 billion up from $7.4 billion in FY 2017.

Alaska

Alaska continues to dig out of its more than nine years of budget gaps and deficits, and while the state was expected to have a slight surplus of $256 million in its unrestricted general fund revenue, due to the increase of oil prices, it helped to reduce the size of the state's on-going budget deficit going into FY 2019.

Arizona

According to the June Arizona Joint Legislative Budget Committee (JLBC) monthly fiscal highlight report, the state ended its FY 2018 with a revenue surplus of about $238 million.

Arkansas

Arkansas closed its books on FY 2018 with a surplus of $41.7 million, despite the state not meeting its revenue projections for June.

California

California ended its fiscal year with another surplus. The state's total revenue was $19.9 billion more than expected; $1.53 billion more than estimates in the governor's May revision and $6.83 billion greater than anticipated in the 2017-2018 Budget Act, according to the state controller's report.

Colorado

Colorado finished the year with a $1.2 billion surplus due to a deal struck by lawmakers in 2017 that would exempt a state hospital fee from the state's revenue cap and thereby would give the state budget room to grow without having to return money to taxpayers under TABOR. Instead, it appears that Colorado is on pace to return $200 million to state taxpayers over the next three years.

Connecticut

Connecticut finished the year with a deficit, and although the figures will not be final until this fall, they have been revised to $505 million dollars, less than the projected FY 2018 deficit of $642.4 million anticipated in June. The state has been able to build its rainy day reserve account, with the state estimating it will deposit $779.4 million in the budget reserve after closing the books. Coupled with existing funds, that would elevate the reserve to $992.3 million, or 5.25 percent of annual operating expenses.

Delaware

Delaware Gov. John Carney signed an executive order in June to create a benchmark budgeting mechanism and a Budget Stabilization Fund for budget planning to help the state take a more sustainable, long-term approach to annual budgeting. The state carried over $335.6 million in revenue to its FY 2019 budget, and put $231.5 million into its budgetary reserve account.

Florida

Florida’s Department of Revenue reports increased revenues of less than 1 percent relative to expectations but 6 percent over the previous year for the state in FY 2018 for total collections of $37.3 billion. Part of the state’s limited performance versus expectations is due to the revenue office anticipating 6 percent growth in sales tax, the state’s largest source of revenue, within 0.01 percent. Corporate income and excise taxes were particularly strong relative to expectations.

Georgia

The state reports that tax collections rose 4.8 percent during the first 11 months of fiscal year 2018. Several strong years of revenue growth combined with budget cuts has left the state with a projected $2.5 billion in its reserves as the state moves into FY 2018-19.

Hawaii

According to Gov. David Ige's financial plan released in April, he projected that the state would close FY 2018 with a general budget surplus of $1 billion. The Hawaii Department of Taxation reportedly believed the administration's projection was conservative, but the department has not released its June report as of yet for final revenue totals.

Idaho

While Idaho did not meet its revenue projections for June, the state did close the fiscal year with a $100.7 million surplus.

Illinois

Overall revenue in Illinois outperformed the state’s forecasts by approximately 2.0 percent in FY 2018 due to an income tax hike, though the state faces fiscal challenges in FY 2019 and beyond, according to the legislature’s Commission on Government Forecasting and Accountability.

Indiana

Indiana recorded a surplus of $100.4 million in FY 2018 and now has an ongoing budget reserve of nearly $1.8 billion, roughly 11.3 percent of the state’s annual spending. The surplus comes despite a significant, unexpected $327.1 million expense to the Department of Child Services to account for their significant caseload bump as a result of the opioid epidemic.

Iowa

According to Gov. Kim Reynolds, the state was expected to end its fiscal year with its finances in good shape. The state was reportedly experiencing an influx of revenue due to changes in the federal tax law; however, Iowa does not close out its books until Sept. 30, and final figures will not be available until then.

Kansas

Kansas ended FY 2018 exceeding projections by more than $300 million. Higher revenues were mainly driven by repeal of tax policies enacted by the former Brownback administration.

Kentucky

Kentucky posted a modest revenue growth rate of 3.4 percent this year, according to the Governor’s Office for Economic Analysis. The rise was largely due to sales tax receipts, which rose by about 3.5 percent.

Louisiana

Louisiana's revenue outlook improved slightly during FY 2018, and a revised revenue forecast in April allotted a $346 million surplus to the state's projected FY 2019 shortfall of $994 million, reducing it to $648 million. It took two special sessions for lawmakers to address revenue-raising measures, as well as budget cuts during the regular legislative session to craft a balanced budget. Final revenue numbers for FY 2018 are not expected to be available until September.

Maine

Governor Paul R. LePage announced that Maine concluded FY 2018 with an unappropriated surplus of $175.8 million. The state is expecting to operate throughout FY 2019 without internal borrowing or other mid-year adjustments. The current balance in the Budget Stabilization Fund is $272.9 million, while the Reserve for Tax Relief stands at $28.4 million. The Reserve for Operating Capital, which received $2.5 million, has a current balance of $14.9 million. In all, the state carried financial reserves totaling $316.2 million into the new fiscal year.

Maryland

While the state has not yet released its end-of-year analysis, Maryland’s Board of Revenue released an update in March of this year anticipating a slight decrease in revenues relative to initial expectations. The revised FY 2018 figures expected an increase of $370 million relative to FY 2017, but about $39 million below initial targets, largely due to weaker corporate taxes (down $29 million from expectations) and sales tax (down $10 million).

Massachusetts

The commonwealth’s revenue collections for FY 2018 were $27.8 billion, $2.2 billion over FY 2017 collections and $1.1 billion over expectations. While withholding and sales tax grew better than expected, spikes in the more volatile non-withheld income and corporate taxes accounted for nearly 90 percent of the better-than-expected performance.

Michigan

Due to higher than expected sales tax revenues, updated projections from the Michigan Treasury Department estimate that the state will have an additional $313.2 million available for FY 2017-2018 and $176.9 million available for FY 2018-2019. The surplus revenue is expected to be used for initiatives such as road improvement, investment in talent and workforce development, and school safety. 

Minnesota

The state has a $329 million surplus that was the basis of this year's supplemental budget session, which quickly deteriorated between Gov. Mark Dayton (DFL) and the Republican-controlled legislature. In the end, Dayton and lawmakers were unable to agree on funding priorities and Dayton vetoed major portions of the supplement budget.

Mississippi

The Mississippi Legislative Budget Office shows that the state's General Fund ended with $88 million over projected estimates from the start of the FY 2018 fiscal year. The surplus was due in large part to a lawmakers targeting a more stringent budget for the fiscal year. While overall revenue went up less than 1 percent, individual income taxes grew 2.5 percent and sales taxes grew 1.4 percent.

Missouri

Missouri ended its FY 2018 with a $350 million surplus. About $195 million, that had been set aside in case the state did not end with a balanced budget, was released by Gov. Mike Parson at the end of June.

Montana

Last November, Montana was projected to have a $227 million revenue shortfall going into the biennium FY 2018 legislative session, which led both lawmakers and the Bullock administration to make severe budget cuts. And then the state experienced enough of a revenue surplus ($130 million) in the remaining months of the fiscal year to reverse those cuts, and put $40 million into the general fund. Lawmakers restored a total of $45 million in cuts and added $45 million to the state's savings account.

Nebraska

Nebraska ended its fiscal year with more revenue than expected. The state collected $4.6 billion, or 1.4 percent, above its certified forecast of $4.5 billion. This slight revenue surplus was due to higher corporate and income tax revenues, as well as net miscellaneous taxes.

Nevada

According to an August report, Nevada's fiscal year to date (July – May) showed the state experiencing 95 consecutive months of growth, and its tax revenues up 4.7% over May 2017. The 2 percent state portion of Sales and Use taxes that goes into Nevada's General Fund totaled $98.53 million in May, up nearly 5 percent from last fiscal year, and offers a positive indicator of the state's overall economy.

New Hampshire

New Hampshire was experiencing another year of budget surplus, and state legislators approved $100 million in extra spending in May after a revenue windfall, with the state’s final report due by Oct. 1.

New Jersey

New Jersey ended FY 2018 with little-to-no reserves in the general fund, according to estimates from the state’s Department of Treasury. Despite growth in gross income tax receipts and relatively steady sales tax receipts, revenue from the state’s corporate business tax declined more than 28 percent in FY 2018. The state’s treasurer estimates that New Jersey could face a deficit of $2.4 billion in FY 2019.

New Mexico

Oil and gas gross receipts contributed to New Mexico's tax revenues being up more than 16.7 percent ($252.4 million) since the start of FY 2018. The state has yet to release its latest revenue report, but it is expected that New Mexico ended the fiscal year with a surplus.

New York

Although New York finished FY 2018 with a balanced budget, a recent report from the New York State comptroller suggests that the state’s spending is on track to outpace revenues. Faced with structural issues, the report also warns the state could face even greater deficits if the economy slows or the federal government reduces funding to the state.

North Carolina

With a revenue surplus of $356.7 million in FY 2018, North Carolina was able to generate its fourth consecutive year of revenue surplus. The revenue surplus came in higher than projected due to an additional $282.4 million in projected tax revenue and $74.3 million in projected non-tax revenue. For the fiscal year, the state’s revenue forecast is $23.5 billion.

North Dakota

North Dakota's revenues continued to meet or exceed the state's forecast projections throughout FY 2018; and at the close of June, the state's general fund revenues from biennium-to-date were reported to be 2.1 percent higher than projected, although the forecast admittedly was conservative. While oil and gas extraction tax revenue is 72 percent higher than what North Dakota expected in June, state leaders reported that restored funding for various agency cuts in recent years is unlikely.

Ohio

Ohio finished the 2018 fiscal year with a $657.8 million surplus, which Gov. John Kasich and the state’s lawmakers placed in what is now a nearly $2.7 billion rainy day fund. Budget officials were more conservative with their revenue projections than they were in FY 2017, when the state missed projections during 11 of the 12 months of the fiscal year.

Oklahoma

Oklahoma ended its fiscal year with higher than expected revenues  ($1.1 billion in June and $33.8 million in new revenue in May) that resulted from a number of months in which the state generated better than expected revenue collections due to legislation the state enacted during 2017. In addition, greater revenues also stemmed from changes in Oklahoma's sales tax exemptions and gas production tax incentives.

Oregon

Oregon continues to generate revenue surpluses, and ends its fiscal year with the possibility of returning $555 million in taxpayer rebates due to changes in federal and state tax laws. However, the state's streak of fiscal year surpluses may be coming to an end. Lawmakers are reportedly expecting a $1 billion funding shortfall in FY 2019 and the beginnings of a budget crisis.

Pennsylvania

The Pennsylvania Department of Revenue reported that the commonwealth is projected to have a $22 million surplus for FY 2018. The surplus was driven by $34.6 billion in general fund collections, a 9 percent increase from the previous year. Both sales tax and personal income tax were ahead of estimates.

Rhode Island

Rhode Island was projected to end the fiscal year with a $32 million surplus, according to May reports, with third quarter spending and revenues higher than anticipated. The state’s final report should be issued in September.

South Carolina

In its FY 2019 budget proposal, the state projected a $232 million surplus including both tax and non-tax revenue for FY 2018 due to taxes generating more revenue than the last fiscal year. The state projects a revenue growth rate of 6.8 percent – up from the estimated 4.6 percent at the start of the fiscal year. The state also projects $8.4 billion in total tax revenue – up from the expected total tax revenue of $8.2 billion (a surplus of $174 million for tax revenue).

South Dakota

South Dakota ended its fiscal year with a $16.9 million surplus. The state's general fund reportedly had lower expenditures and higher revenues than forecasted.  According to the governor's office, state agencies spent $10.7 million less than appropriated, and revenues exceeded estimates adopted by $6.2 million.

Tennessee

Tennessee’s FY 2018 ends in July, but through June, the state is on pace to exceed expectations by 2.7 percent. The state’s sales taxes are particularly driving revenue growth, with an increase more of more than 4 percent over FY 2017, but vehicle registration, income, privilege and business tax revenues are also seeing gains relative to expectations.

Texas

In January, state lawmakers were told to expect a $3 to $4 billion dollar shortfall in the FY 2018 budget, but at the end of its fiscal year (Aug. 31), Texas reportedly will have $2.8 billion more in revenues than expected. The uptick in revenues is due to the increase in oil and energy prices.

Utah

Utah reportedly ended its fiscal year with tens of millions of dollars in surplus revenues, while the state forecasted about $500 million in extra revenue for FY 2019. The surplus is linked to changes in the federal tax law.

Vermont

The Vermont general fund finished FY 2018 ahead of target by $65.32 million, driven by personal income and corporate income exceeding their targets by $38.27 million and $16.96 million respectively. Compared to FY 2017, the general fund revenues increase by $101.92 million.

Virginia

Governor Ralph Northam’s office announced FY 2018 revenues $552 million above FY 2017 levels. About 40 percent of the increase was from income withholding, which grew 5.4 percent on the year, above the commonwealth’s expected 3.5 percent. Sales tax revenues posted a more modest return of 3.1 percent.

Washington

Washington reports a revenue surplus in its current biennium of $536 million – with a net increase of $298 million due to various changes made by lawmakers in this year's legislative session. The surplus is more than previously forecasted.

West Virginia

After starting FY 2018 with an $11 million budget shortfall, Gov. Jim Justice announced a total net collections of over $4.2 billion for the year – $20 million ahead of estimates. The Department of Revenue projects that the state’s end-of-year surplus is more than $32 million. This marks the largest July revenue surplus since fiscal FY 2008.

Wisconsin

Wisconsin state agencies spent roughly $116 million less than they were authorized to spend in FY 2018, which helped contribute to a $579 million surplus. The surplus exceeded projections by nearly $126 million and is the state’s largest since 2000.

Wyoming

In April, the state's Consensus Revenue Estimating Group (CREG) reported that Wyoming's revenues are improving and the forecast is likely to be met or slightly exceed projections, barring a significant decline in major commodity prices or production. According to the July CREG revenue update, the state's revenues are just under forecast, but continuing to improve.

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