With the start of the new year, governors have begun to deliver their State of the State addresses, laying out proposals for new programs and discussing the conditions of their states. As states’ revenue levels return to more typical levels, lawmakers, with a few exceptions, are taking a more cautious, or constrained, view of their funding priorities and proposed initiatives.

A new report from NASBO (National Association of State Budget Officers), State Expenditures Report for Fiscal Years 2021-2023, finds while spending remains elevated compared to pre-pandemic levels, it is starting to slow. Spending from states’ funds rose 12.3% in FY2023 as a result of states spending surplus funds.

In this week’s continuing coverage of gubernatorial addresses as they impact the innovation economy, New Mexico Governor calls for $170 million to bolster hydrogen, geothermal and next-generation battery storage. Rhode Island Governor proposes building a new life science school at the University of Rhode Island and cybersecurity bond to grow Rhode Island College’s cybersecurity program. Meanwhile, West Virginia’s governor proposes increasing spending to attract people to move to the state.

California’s efforts to grow the role of its community colleges (CCs) was reinforced with the governor’s recent budget request to establish a fully online public community college, while a report reviewing the state’s established pilot program to offer baccalaureate degrees at some CCs presented some serious questions.

California online community college proposed

In this week’s review of state budget proposals, Alabama and Arizona’s governors are proposing funding increases for higher education, while Louisiana is facing cuts due to a budget shortfall. In Hawaii, the governor is seeking supplemental funding for the Hawaii Technology Development Corp to expand its grant making capacity, while Idaho and South Carolina’s governors are seeking more money for workforce programs.

Alabama

Governors continue to be cautious in their budget proposals, with many TBED programs seeing level funding or modest increases and cuts in some states while few new programs are being introduced. Kentucky is transferring one program to economic development, while at the same time reducing its funding. Missouri is proposing short-term benefits that may impact longer-term growth, while New York is looking to fund its life sciences initiative announced last year and Vermont is proposing an increase for its growth and innovation pilot project.

Kentucky

States are beginning their next round of budget proposals, following last year’s cautious approach to budgeting. SSTI begins its review of the proposals this week, presenting findings on how states are funding elements of the innovation economy with a review of Alaska, Colorado, Florida and Wyoming state budgets.

Workforce development programs and apprenticeships continue to win favor in many of the governors’ state budget proposals. In our latest review of TBED initiatives being proposed in state budgets, we found Kansas asking for additional funds for research, worker training and apprenticeships; Massachusetts is looking to double community college scholarship funding and increase several workforce development initiatives; and in Michigan, skilled trades training would receive a boost.

Kansas

States enacted cautionary budgets for 2018 with general fund spending projected to grow 2.3 percent in fiscal 2018, the lowest increase since 2010, according to the most recent NASBO survey. The National Association of State Budget Officers (NASBO) released its Fiscal Survey of the States showing caution on the part of policymakers following two years of sluggish revenue growth and spending pressures.

Two recent reports examining the state of the states’ budgets and resources have some warnings for those involved in the budgeting process.

State spending for the Oregon innovation economy during the 2017-2019 biennium in the Oregon Business Development Department received a sharp increase, thanks in part to nearly $14 million of funding for the new Oregon Manufacturing Innovation Center (OMIC).

In general, the effect of the pandemic on states’ budgets due to the wave of business, retail, and commerce shutdowns, as well as other reduced economic activity across the nation, is not entirely known, or too early to forecast; however, a number of states are beginning to experience the initial impacts of a substantial downturn. With several states having already enacted their 2020-21 budgets, special sessions are expected later this year to deal with declining revenues. Others ended sessions early without a new fiscal year spending plan in place.

Postposed primary elections, shuttered schools, sheltering in place orders and millions of workers shifting to home offices while others are displaced completely — the COVID-19 pandemic is radically altering the way of life for the country. States, too, are scrambling to respond to the pandemic while dealing with ongoing legislative sessions and budget negotiations. Some of those responses are detailed here.

Proving that innovation is appealing to states regardless of their size or political leanings, new initiatives in both Democratic and Republican states, as well as large states like California and small states like Vermont, are driving innovation agendas into action in areas ranging from clean energy and aid for students and colleges, to new venture capital investments and bond financing to support business collaborations with higher education to help translate cutting-edge research into products and companies.

As the country’s working age demographic continues to get older, state budgets, especially those in the Northeast, will face greater pressure from increased Medicaid costs, says a new report from S&P Global Ratings. Environmental, Social, And Governance: Increasing Generational Dependency Poses Long-Term Social Risks To U.S.

As the summer ends and students begin returning to school, the situation for students in the University of Alaska System is uncertain, although less so after recent negotiations between Gov. Mike Dunleavy and University of Alaska (U.A.) System’s administration.

New Mexico Gov. Michelle Lujan Grisham became the latest governor to propose a plan for free tuition, with what has been called the “one of the most ambitious attempts to make higher education more accessible.” If approved, the plan would allow in-state students to attend any of the 29 state public colleges or universities, regardless of income. It is designed as a “last-dollar” program.

New Jersey Gov. Phil Murphy signed multiple bills late last month that may help position the state as a leader in technology-based economic development. One bill increases the tax credit for angel investors in qualified technology companies, with even larger credits available for investments in women- and minority-owned businesses and those located in low-income areas. Meanwhile, the state’s approved FY 2020 budget includes $1.0 million for the New Jersey Commission on Science, Innovation, and Technology.

An issue brief this month from the Pew Research Center asserts that despite the current national economic expansion still underway, states are still coping with lasting effects of the 18-month recession that ended in 2009. Calling it a “lost decade,” the authors found that although budget pressures have eased in several ways, states still have not fully restored cuts in funding for infrastructure, public schools and universities, the number of state workers, and support for local governments.

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.

In its latest report on the conditions of the states, the National Association of State Budget Officers (NASBO) found that conditions continue to improve and show more stability, with funding expected to grow 4.3 percent in FY 2019. NASBO also reported that 40 states saw general fund revenue collections coming in higher than budget projections in fiscal 2018. General fund revenues grew 6.4 percent in fiscal 2018, due to an increase in personal income tax collections, and are projected to grow 2.1 percent in fiscal 2019.

The National Association of State Budget Officers (NASBO) is reporting that total state spending rose in FY 2018, exceeding $2 trillion for the first time. While spending increased in both FY 2017 (3.8 percent) and 2018 (4.6 percent), it was still below the historical average of 5.6 percent, with the strongest growth in spending reported in the far West and Southeast. All program areas experienced an increase in total state spending, with Medicaid showing the largest percentage increase.

Strict balanced budget requirements, tax or expenditure limits and party control of a state legislature and governorship can influence innovation funding when states respond to deficits. As states face new political landscapes and decision makers in their legislatures, the implications of a recent study on the topic emphasize the importance of keeping innovation on a state’s agenda.

Nearly a month after the start of the new fiscal year, Massachusetts legislators have approved an FY 2019 budget. Science and innovation stakeholders may find it worth the wait. Included in the $42 billion budget are new funding for a precision manufacturing initiative that will fund multiple, local activities ($2.7 million) and $500,000 for registered apprenticeships.

Before America had a pandemic to fight, U.S. governors collectively expected 10.8 percent more revenue to work with in FY 2021 than current estimates projected in the latest National Association of State Budget Officers (NASBO) survey. Thirty-five states reported in the semi-annual survey released Dec. 23 that general funds had not met expectations for FY 2020; 19 states made mid-year cuts as a result.